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  5. 2016-FRR

Free 2016-FRR Exam Braindumps (page: 32)

Page 32 of 86
PDF with 342 Questions

A risk associate is trying to determine the required risk-adjusted rate of return on a stock using the Capital Asset Pricing Model.
Which of the following equations should she use to calculate the required return?

  1. Required return = risk-free return + beta x market risk
  2. Required return = (1-risk free return) + beta x market risk
  3. Required return = risk-free return + beta x (1 ­ market risk)
  4. Required return = risk-free return + 1/beta x market risk

Answer(s): A



To estimate the forward price of oil, a commodity trader would most likely use the following pricing relationship:

  1. Oil forward price = Expected future oil price ± Oil market risk premium
  2. Oil forward price = Expected future oil price ± storage cost + Oil market risk premium
  3. Oil forward price = Expected future oil price ± Oil storage cost + (1 + Oil market risk premium)
  4. Oil forward price = Expected future oil price ± Oil storage cost + (1 - Oil market risk premium)

Answer(s): A



Over a long period of time DeltaBank has amassed a large equity option position.
Which of the following risks should be considered in this transaction?
I) Counterparty risk on long OTC option positions
II) Counterparty risk on short OTC option positions
III) Counterparty risk on long exchange-traded option positions
IV) Counterparty risk on short exchange-traded option positions

  1. I
  2. I, II
  3. II, III
  4. II, III, IV

Answer(s): A



Which one of the following four statements best describes challenges of delta-normal method of mapping options positions?

Delta-normal method understates

  1. Risks of long and short positions for both calls and puts.
  2. Risks of long option positions for puts and overstates risks of short option positions for calls.
  3. Risks of long option positions for calls and overstates risks of short option positions for puts.
  4. Risks of short option positions and overstates risks of long option positions for both calls and puts.

Answer(s): D



Page 32 of 86



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