The intrisic value of a security is based on which of the following items. I- amount of risk  II- current market value of the security  III- discount rate applicable to the security  IV- estimated future cash flow from the security  A- I and III only B- III and IV only C- I, II and III only D- I, III, and IV only

Q: Which broadly ranks credit default risk from lowest to highest?     Conforming, CRA, subprime…

A: Default risk is the risk that a lender takes on in the chance that a borrower will be unable to make…

Q: Securities that plot above the security market line (SML) are undervalued.   Select one: True…

A: The capital asset pricing model (CAPM) and security market line (SML) are used to calculate the…

Q: What differences between the daily market valuation of a traditional security and the valuation…

A: There is need of proper valuation of security there many methods of valuation.

Q: Which of the following is most likely to expose the holders to counterparty credit risk? A.…

A: Counterparty credit risk is the risk where the party involved in the transactions makes default in…

Q: The value of a security:   a. Decreases as the investor’s planned holding period increases.   b.…

A: Holding period: Holding period is the time than an investor holds a security for. This simply means,…

Q: An inflation hedge is an asset that increases in value at a rate equal to or greater than the rate…

A: Hedging is technique of reducing risk. This reduction in risk also results typically in a decrease…

Q: What is basis risk in relation to futures contract hegding?

A: Basis Risk:Basis risk is a financial risk which arises from the incompatibility in the positions of…

Q: A. Liquidity risk B. Political risk C. Currency risk D. Competition risk

A: International fund involve investment at international levels.

Q: Having longer-maturity assets than liabilities causes banks to bear which of the following risks? I.…

A: a risk is an uncertain event that will occur or non-occurring and implies future uncertainty and…

Q: A realized gain or loss on the sale of an available-for-sale security is determined by comparing…

A: SOLUTION- REALIZED GAIN OR LOSS- REALIZED GAIN IS EARNED BY SELLING AN ASSET HIGHER THAN THE…

Q: Notes on completes Markets Competitive equilibrium in multi-period security markets

A: Complete markets and competitive equilibrium in multi-period security markets refer to a theoretical…

Q: Investors who have international investments are subject to I. political risk II. currency risk…

A: The investors invest in various assets or at various sources in order to generate higher returns or…

Q: 1. Which one of the following is not a money market security: a. Treasury Bill. b. REPO. c. LIBOR.…

A: Money market securities are short term securities or instruments generally issued by government,…

Q: The maximum rate of return needed to induce an investor to purchase or hold a security is referred…

A: The statement is TRUE.Explanation:Step 1:An investor's required rate of return is the lowest…

Q: When valuing a short-term security, we commonly use:

A: Introduction: Short-term securities refer to securities that have a life tenure of less than one…

Q: isk that affects at most a small num a. total risk b. portfolio risk c. unsystematic risk D

A: Risk refers to the form of uncertainties linked to a business proposal, investment, or even in the…

Q: Indicate the type of hedge each activity described below would represent. Activity 1. An options…

A: The objective of the question is to identify the type of hedge each activity represents. Hedging is…

Q: Define Foreign currency hedge.

A: Hedge: The process through which the risk associated with a particular project, can be eliminated is…

Q: Market risks are: B. Interest rate risk, foreign exchange risk, portfolio concentration, commodity…

A: Market risk are associated with ups and down of market. It referes to risk of loss aries from the…

Q: Which one is the least risky option? A. Bonds B. Shares C. Treasury Bills D. Trading

A: Trading involves the buying and selling of financial instruments, such as stocks, bonds, currencies,…

Q: hanging the market risk premium A. Changes neither the y-intercept nor the slope of the security…

A: The market risk premium is the variations among the expected return on a market portfolio and the…

Q: A derivative security derives its value from another previously issued instrument (a stock or bond).…

A: Derivatives can be used to for hedging or arbitrage purpose.

Q: The contract value of a GIC is __________; the fair value of a GIC is __________. Select one: a.…

A: GIC refers to the guaranteed investment plan which pays the interest and maturity to the beneficiary…

Q: Which of the following are characteristics of money market securities? I. Long term maturities.…

A: Money market securities refers to interest bearing securities that are highly liquid and highly…

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.