Online Access Free 8006 Exam Questions

A company has a long term loan from a bank at a fixed rate of interest. It expects interest rates to go down.
Which of the following instruments can the company use to convert its fixed rate liability to a floating rate liability?

• A.A currency swap
• B.A fixed for floating interest rate swap
• C.Interest rate futures
• D.A forward rate agreement

What can the buyer of a 6 x 12 FRA expect to receive (or pay) if the contracted rate is 10% and the settlement rate is 12%? Assume contract notional is $100m.

• A.Pay $943,396
• B.Receive $1,000,000
• C.Receive $943,396
• D.Pay $1,000,000

A zero coupon bond matures in 5 years and is yielding 5%. What is its modified duration?

• A.5.25
• B.5
• C.4
• D.4.76

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?

• A.Buy the index spot and sell the futures contract
• B.Buy the futures contract and sell the index spot
• C.Buy the index spot and buy the futures contract
• D.Sell the futures contract

Which of the following statements is true for a Credit Linked Note (CLN)?

• A.The investor in the note is the protection seller
• B.The CLN will yield the risk free rate
• C.The investor in the note is the protection buyer
• D.If a credit default occurs, the investors will get their full money back