Reference no: EM133007211

Questions -

Q1. A hedge fund manager has 1 million nine month call options. The options are funded half by loans and half by equity. Each individual call option has a 0.7 delta and $2 premium or price. What is the option portfolio's delta?

a. 1.4 million

b. 1.4

c. 0.7 million

d. 0.7

e. 2

Q2. A hedge fund manager has 1 million stocks in the same firm. The stock assets are funded half by loans and half by equity. Each individual stock has a 0.7 CAPM beta and $2 price. What is the stock portfolio's beta?

a. 1.4 million

b. 1.4

c. 0.7 million

d. 0.7

e. 2

Q3. An investor wants to know how future sudden capital returns on the market portfolio may affect their assets. Which of the following measures is most useful?

a. CAPM beta.

b. Macaulay duration.

c. Black-scholes option delta (N(d1)).

d. Asset-to-equity ratio.

Q4. Which of the following returns is amplified or most affected by leverage?

a. Returns on assets, rV.

b. Returns on debt, rD.

c. Returns on equity, rE.

d. Returns on both assets and equity, rV and rE.

e. Returns on assets, debt and equity, rV, rD and rE.

Q5. In Toda's (2020) model of the pandemic, events that affect the output (Y) of capital and labour are diversifiable or systematic events? Events that affect output are:

a. Diversifiable.

b. Systematic.

c. Both diversifiable and systematic.

d. Neither diversifiable nor systematic.