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CFA CFA I Exam
CFA Level I Chartered Financial Analyst (Page 121 )

Updated On: 26-Jan-2026
Page 121 of 793
PDF with 3960 Questions

Ron Travis, CFA, manages a portfolio of long-term and short-term bonds. The portfolio is equally weighted between 1-year, 2-year, 10-year, and 20-year maturities and currently has a portfolio duration equal to 7.0. Travis is concerned that 1- and 2-year interest rates are going to increase by 100 basis points while 10- and 20-

year rates decrease by 100 basis points. If his prediction is correct, Travis' measure of duration will be ineffective at predicting interest rate risk since portfolio duration is only accurate when the:

  1. yield curve does not shift.
  2. shift in the yield curve is parallel.
  3. yield curve steepens.

Answer(s): B



Which of the following best describes an option that gives the owner the right to sell 100 shares of stock only on the expiration date three months from now at a strike price of $35, when the current stock price is $25? This option is an:

  1. out-of-the-money American put option.
  2. in-the-money European put option.
  3. out-of-the-raoney European put option.

Answer(s): B



Roland Cad owns a portfolio of large capitalization stocks. He has a positive long term outlook for the stock market, but Carl is worried about the possible effects of recent changes in monetary policy. Carl would like to protect his portfolio from any sudden declines in the stock market, without selling his holdings. The most likely way for Carl to achieve his objective of limiting the downside risk of his portfolio is to:

  1. sell put options on the S&P 500.
  2. sell an S&P 500 futures contract.
  3. buy an S&P 500 forward contract.

Answer(s): B



Julia Chen, a portfolio manager for U.S.-based Dane Investments, has just established a short position in Swiss franc currency futures as part of a currency overlay strategy. The position consists of 100,000 contracts with an initial margin of $4,000, a maintenance margin of $2,500, and a contract price of 0.9120 USD/CHF. If the futures price on the subsequent two days is 0.9300, and 0.8928, respectively, what will be her margin account balance at the end of the second day?

  1. $4,000
  2. $6,200
  3. $7,720

Answer(s): B



Sue Wie, CFA, is the chief financial officer for Garth Company. The company will need to borrow S75 million in the near future to fund a plant expansion. Wie expects interest rates will rise and decides to hedge against this risk using a 3 * 6 LIBOR based forward rate agreement (FRA). The underlying rate for this FRA is:

  1. 60-day LIBOR.
  2. 90-day LIBOR.
  3. 180-day LIBOR.

Answer(s): B



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