Sample questions for mid-term quiz

Concepts
1.

Common stock issued by Digital Equipment Corporation is traded in which of the

following markets?
a.
Money market.
b.
Debt market.
c.
Derivatives market.
d.
Capital market.
e.
None of the above.

2.

Which of the following statements about duration is most correct?

a.
Duration for a coupon bond is shorter than its maturity.
b.
For a zero-coupon bond, the duration is equal to its maturity.
c.
For bonds with the same maturity and the same yield, the lower the coupon rate,
the greater a bonds duration and volatility.
d.
a & b only
e.
All the above

Calculation
3. Hedge fund XYZ had total assets of 100 million at the beginning of August, 2008, of
which, 90 million are borrowed from financial institutions. Within one month, its
portfolio depreciated by 5%. How much does the hedge fund partners lose in the month?
a.
b.
c.
d.
e.

0%
20%
50%
90%
100%