Free Access GARP.2016-FRR.v2022-08-09.q102 Practice Test (Page 16)

Question 71

A bank owns a portfolio of bonds whose composition is shown below.

What is the modified duration of the portfolio?

A.2.30

B.1.30

C.0.5

D.8.5

Question 72

Which one of the following four statements correctly defines chooser options?

A.These options give the holder the right to exchange one asset for another.

B.The owner of these options decides if the option is a call or put option only when a predetermined date
is reached.

C.These options represent a variation of the plain vanilla option where the underlying asset is a basket of
currencies.

D.These options pay an amount equal to the power of the value of the underlying asset above the strike
price.

Question 73

Which one of the following four statements about the "market-maker" trading strategy is INCORRECT?

A.This strategy is independent of market liquidity and number of other market makers.

B.A market maker that attracts buy and sell orders can make a profit from the spread quoted between the
buy and sell price.

C.A market maker can benefit from the market information she gets from the trades she is asked to
execute.

D.This risk in this strategy is that traders have to take positions that may quickly incur a loss.

Question 74

Returns on two assets show very strong positive linear relationship. Their correlation should be closest to
which of the following choices?

A.15%

B.100%

C.60%

D.45%

Question 75

When trading exotic options, one needs to consider the following risks:
I. Spot foreign exchange risks
II. Forward foreign exchange risks
III. Plain vanilla options risks
IV. Option-specific risks

A.II, III, IV

B.I, II, IV

C.I, II, III, IV

D.I, III

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