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

As a bond approaches maturity, its value will be driven less by the time value of money or its coupons, and more by its redemption value, ie the par. Therefore as maturity approaches, its value converges to its par value and this phenomenon is called pull to par.

There was no event such as the CDO squeeze in 2008. (Quite on the contrary, securitized products were selling at distressed prices.).

The silver squeeze of 1979-80 (Hunt brothers), the Chicago fire of 1872 (leading to a short squeeze on wheat), and the wheat squeeze (Hutchingson) of 1866 are real historical events that led to short squeezes in commodity markets. Choice 'b' is therefore the correct answer.

For the PRM exam, you should try to remember the event broadly, and the commodity involved.

Systematic risk refers to market risk that cannot be diversified away. Specific risk relates to the unique risk from the securities selected in the portfolio, and these can be diversified away by adding other securities to the portfolio. Diversifiable risk is risk that can be diversified away, ie the same as specific risk. Portfolio risk is the total risk of the portfolio that includes both specific and systematic risk.