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Financial Risk and Regulation 2016-FRR Updated Exam

Page: 5 / 28
Total 387 questions

Financial Risk and Regulation (FRR) Series Questions and Answers

Question 17

Which of the following statements regarding bonds is correct?

I. Interest rates on bonds are typically stated on an annualized rate.

II. Bonds can pay floating coupons that are directly linked to various interest rate indices.

III. Convertible bonds have an element of prepayment risk.

IV. Callable bonds have an element of equity risk.

Options:

A.

I only

B.

I and II

C.

I, II, and III

D.

II, III, and IV

Question 18

Which one of the following four statements on factors affecting the value of options is correct?

Options:

A.

As volatility rises, options increase in value.

B.

As time passes, options will increase in value.

C.

As interest rates rise and option's rho is positive, option prices will decrease.

D.

As the value of underlying security increases, the value of the put option increases.

Question 19

Except for the credit quality of the Credit Default Swap protection seller, the following relationship correctly approximates the yield on a risk-free instrument:

Options:

A.

Bond + CDS

B.

Bond + CDS + Market Spread

C.

Bond - CDS

D.

Bond - CDS - Market spread

Question 20

What is generally true of the relationship between a bond's yield and it's time to maturity when the yield curve is upward sloping?

Options:

A.

The longer the time to maturity of the bond, the lower its yield.

B.

The longer the time to maturity of the bond, the higher its yield.

C.

The shorter the time to maturity of the bond, the higher its yield.

D.

There is no relationship between the two

Page: 5 / 28
Total 387 questions