Describes the components of interest expense

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Reference no: EM131889822

1. Which of the following best describes the components of interest expense when a bond is issued at a? discount?

A. The difference between the interest expense and the cash payment is the amount of discount amortized.

B. The interest expense will equal the discount amortization.

C. The interest expense will remain constant for the life of the bond.

D. All of the above are correct

2. A portfolio is worth $100 million. To protect against market downturns, the managers of the portfolio require a 6-month put option with a strike price of $90 million. The risk free rate is 5% per annum, and the standard deviation of the portfolio is 20% per annum. What proportion of the portfolio should be sold and invested in risk-fee assets to match the delta of the required option?

A. 19.50%

B. 22.79%

C. 20.33%

D. 18.90%

E. 16.05%

Reference no: EM131889822

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