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8006 – Exam I: Finance Theory Financial Instruments Financial Markets - 2015 Edition

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Showing 4–6 of 15 questions

Question 4

Which of the following correctly describes a "reverse repo"?

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    An asset swap that is offset by an identical but opposite swap

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    Lending cash with securities as a collateral

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    Borrowing cash while posting securities as a collateral

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    A repo with an undefined maturity period

Question 5

An investor believes that the market is likely to stay where it is. Which of the following option strategies will help him profit should his view be proven correct (assume all strategies described below are long only)?

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    Strangle

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    Collar

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    Butterfly spread

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    Straddle


Question 6

A trader finds that a stock index is trading at 1000, and a six month futures contract on the same index is available at 1020. The risk free rate is 2% per annum, and the dividend rate is 1% per annum. What should the trader do?

Select an option, then click Submit answer.

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    Buy the index spot and sell the futures contract

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    Buy the futures contract and sell the index spot

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    Buy the index spot and buy the futures contract

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    Sell the futures contract