A three year bond has a fixed coupon rate of 12% pa, paid semi-annually. The bond's yield is currently 6% pa. The face value is $100. What is its price?

In these tough economic times, central banks around the world have cut interest rates so low that they are practically zero. In some countries, government bond yields are also very close to zero.

A three year government bond with a face value of $100 and a coupon rate of 2% pa paid semi-annually was just issued at a yield of 0%. What is the price of the bond?

Which of the following statements about option contracts is **NOT** correct? For every:

A trader **sells** a one year futures contract on crude oil. The contract is for the delivery of 1,000 barrels. The current futures price is $38.94 per barrel. The initial margin is $3,410 per contract, and the maintenance margin is $3,100 per contract.

What is the smallest price change that would lead to a margin call for the seller?

Which of the following is **NOT** a valid method for estimating the beta of a company's stock? Assume that markets are efficient, a long history of past data is available, the stock possesses idiosyncratic and market risk. The variances and standard deviations below denote total risks.

**Question 701** utility, risk aversion, utility function, gamble

Mr Blue, Miss Red and Mrs Green are people with different utility functions.

Each person has $50 of initial wealth. A coin toss game is offered to each person at a casino where the player can win or lose $50. Each player can flip a coin and if they flip heads, they receive $50. If they flip tails then they will lose $50. Which of the following statements is **NOT** correct?

**Question 708** continuously compounding rate, continuously compounding rate conversion

Convert a **10**% continuously compounded annual rate ##(r_\text{cc annual})## into an effective annual rate ##(r_\text{eff annual})##. The equivalent effective annual rate is:

**Question 720** mean and median returns, return distribution, arithmetic and geometric averages, continuously compounding rate

A stock has an arithmetic average continuously compounded return (AALGDR) of **10**% pa, a standard deviation of continuously compounded returns (SDLGDR) of **80**% pa and current stock price of $**1**. Assume that stock prices are log-normally distributed.

In **5** years, what do you expect the mean and median prices to be? The answer options are given in the same order.

**Question 950** futures, backwardation

**Question 965** foreign exchange reserve, foreign exchange rate, no explanation

Observe the below graph of Chinese foreign exchange reserves held by the central bank, as well as the Chinese currency the Yuan (CNY, also called the Renminbi, RMB) against the US Dollar. Note the inverted y-axis scale on the Yuan exchange rate graph.

Which of the below statements is **NOT** correct?