Magnetar 6. ecome so famous (or infamous)? Copy D Capital is a hedge fund with a

Question

Magnetar 6. ecome so famous (or infamous)? Copy D Capital is a hedge fund with an extensive Wikipedia entry. How did Magnetar a. Magnetar purchased loans of dubious quality from Penn Square. b. Magnetar has been accused of aggravating the financial crisis because positions in credit default swaps and collateralized debt obligations. d. wagnetar created large volumes of subprime mortgages, lending to individuals with low prospects of repayment. d. Magnetar assigned overly optimistic ratings to collateralized debt obligations. 7. A five year zero coupon bond sells for 98 per cent of par. A six year zero coupon ells for 98 per cent of par. What is the one year forward rate, five years from bond now? a. It has to less than zero. b. Exactly zero c. Exactly two per cent. d. More than zero, but not necessarily two per cent. 38. You have purchased 3 stripped Treasury securities. The maturities are 1,3, and 5 years; the yield to maturity is 3 per cent for all 3 maturities and each will pay $ 100 at maturity. What is the duration of your portfolio? a. Not more than 2.8 years. b. More than 2.8 years but not more than 2.9 years c. More than 2.9 years but not more than 2.95 years. d. More than 2.95 years 39. The U.S. standard is $ 48 per fine ounce. (The FRBNY will buy or sell gold at $ 48 per fine ounce.) The U.K. standard is £ 12.00 per fine ounce. (The BOE will buy or sell gold at 12.00 per fine ounce.) The spot rate is $ 3.98 / E 1.00 and you can ship one ounce of gold from New York to London (or London to New York) for $ 0.01 per fine ounce. Is there an arbitrage opportunity? a. Yes, buy gold in New York and sell it in London. b. Yes, buy gold in London and sell it in New York c. Yes, arbitrage is possible in either direction. d. No. 40. You are offered a bond with duration equal to maturity. What else do you know about this bond? a. It must be a zero coupon bond. b. It must sell for a discount. c. It must sell at par. d. It must sell at a premium

Explanation / Answer

Question No.37

Answer : More than Zero , but not necessary two percent.

Option D is Correct.

Question No.38

Duration = 2.92 Years

Option C is Correct : More than 2.90 years but not more than 2.95 Years

Question No.39

UK Standard Rate = 12.00 Pound ounce

UK Exchange Rate against Dollor on one ounce = 48/$ 3.98(Spot Rate $ against Pound)

=12.06

Profit = 12.06 -12.00-0.01

=0.05

Option is B correct: Yes, buy gold in London and sell it in New York.

Question No.40

Option C is correct : It must sell at Par

Year A) Cashflow(B) PVF @ 3%(C) DCF(D) Proportion(E) Duraton(F=E*A) 1 100 0.9709 97.09 0.3532(97.09/274.86) 0.35 3 100 0.9151 91.51 0.3330 1.00 5 100 0.8626 82.26 0.3138 1.57 Total 274.86 1 2.92 Years

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