Finance is part of Accounting and Finance and holds 1,041 questions with answers, free to read and with no account needed.
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Answer: B. 0.24
Total stock return is the sum of capital gains and dividend yields (14% + 11% = 25%, or 0.25).
Answer: A. notion principal
The notional principal is the agreed-upon nominal monetary amount used to calculate interest payments in a swap transaction. Counterparties use this principal figure as a reference base to compute periodic cash flows wit...
Answer: B. cap
An interest rate cap is a financial derivative featuring multiple exercise dates and rate protection. The agreement protects the buyer from rising interest rates exceeding a specified strike rate ceiling. Because it caps...
Answer: A. 110
An option's time value is calculated by subtracting its intrinsic value from the total price. Subtracting the 450 intrinsic value from the 560 total price yields 110. Time value represents the premium investors pay for t...
Answer: A. originating house
The originating house is the lead financial institution within a syndicate that negotiates deal terms. This lead underwriter coordinates the formation of the syndicate and structures the initial security offering. Negoti...
Answer: A. common stock
In a public corporation, the fundamental residual ownership claim on assets and earnings is designated as common stock. Common stockholders sit at the very bottom of the corporate capital priority ladder, absorbing resid...
Answer: C. currency swaps
A currency swap is a financial derivative used to hedge and mitigate exchange rate risk arising from currency mismatches. Counterparties exchange principal and interest payments in different currencies over a predetermin...
Answer: C. high potential of profit
When purchasing a call option, a rising underlying stock price significantly increases the potential for financial profit. The call buyer holds the right to acquire the stock at a fixed strike price regardless of higher...
Answer: D. swap seller
An interest rate swap involves two counterparties exchanging fixed rate and floating rate cash flows. The counterparty that agrees to pay the floating interest rate is designated as the swap seller. Conversely, the party...
Answer: B. Expected rate of return
The expected rate of return is calculated as the weighted average of all outcome probabilities. Each potential return is multiplied by its respective probability of occurrence and summed together. This statistical metric...
Answer: B. Stand-alone risk
The variability of expected returns for a standalone investment project is measured as stand-alone risk. Stand-alone risk evaluates an asset in isolation without considering the diversification benefits of a portfolio. C...
Answer: B. Discount bond
When a bond is priced and traded beneath its face par value, it is classified as a discount bond. A discount bond sells in the secondary market for less than one thousand dollars par value because prevailing interest rat...
Answer: C. swap buyer
In an interest rate swap transaction, the party that agrees to pay the fixed interest rate is characterized as the swap buyer. This participant receives floating rate cash flows in exchange for making predictable fixed r...
Answer: B. 550
An option's total price is calculated by directly summing its intrinsic value and its separate time value components. Adding an intrinsic value of two hundred fifty to a time value of two hundred gives a total price of f...
Answer: B. decrease in stock price
When writing a call option, the probability of the buyer securing a positive payoff increases as the underlying stock price decreases relative to the strike.
