Sample Exam Questions
Sample Exam Questions
1. Financial instruments that are characterized by easy conversion to cash and come in the form of Treasury Bills, Money Market Mutual Funds and Certificates of Deposits are called:
A. Cash equivalents
B. Stocks
C. Derivatives
D. Zero-coupon Bonds
2. The act of reducing a loss by taking a position in derivatives that balances out or significantly reduces the risk of the current position held in the market is called:
A. Day trading
B. Speculation
C. Hedging
D. Position taking
3. Of the many internal control problems inherent in the Barings case, the one control weakness that is most evident is:
A. Access to the accounting system
B. No risk management reports
C. Lack of segregation of duties
D. Excessive positions in the market
4. A Swaption contract is:
A. A swap that has not reached effective date and is used in refinancing.
B. A contract that combines a swap and option and gives the buyer of the contract the right to enter into the swap but not the obligation.
C. A swap in which counterparties exchange floating rate cash flows.
D. A swap in which counterparties exchange floating rate cash flows based on two different countries.
5. A short call option written against a security that is already owned is termed a:
A. Covered Call
B. Naked Option
C. Collar
D. Lost Premium
6. Selling a call without upside protection and/or selling a put without downside protection is referred to as being:
A. Stripped
B. Naked
C. Hedged
D. Covered
Answers: Q1 = A, Q2 = C, Q3 = C, Q4 = B, Q5 = A, Q6 = B
Course Features
- Review the Investment Process: trade processing, settlement and clearance.
- Learn the Short-Term Market: Treasury bills, commercial paper, banker’s acceptance, CDs, repurchase agreements, Eurodollars, and agencies.
- Discuss the Capital Markets: fixed income securities – Treasuries, corporate bonds, zero-coupon bonds, asset-backed securities, mortgage-backed securities, municipals; equities – preferred, common, equity-linked notes.
- Study the Derivative Markets: forwards, futures, options and swaps, credit derivatives – credit default swaps, total return swaps.
- Discuss derivative case studies and current market issues.
- Discuss Investment and Derivative Risks: market, liquidity, legal, credit, operational, management, FX, interest rate, price, weather.
- Learn different types of basis risk: Locational, product, timing, and cash to futures.
- Review Alternative Assets: general partnerships structures, private equity, hedge funds, real estate funds.
- Develop techniques to audit complicated derivative strategies and to analyze risks within the strategies.
- Learn the roles and responsibilities of the front, back and middle offices of a typical investment and derivative environment and the key controls important in each area.
