Which one of the following four options correctly identifies the core difference between bonds and loans?

A. These instruments receive a different legal treatment.

B. These instruments have different pricing drivers.

C. These instruments cannot be used to estimate credit capital under provisions of the Basel II Accord.

D. These instruments are subject to different credit counterparty regulations.

Which one of the following four statements about the relationship between exchange rates and option values is correct?

A. As the dollar appreciates relative to the pound, the right to buy dollars at a fixed pound exchange rate decreases.

B. As the dollar appreciates relative to the pound, the right to buy dollars at a fixed pound exchange rate increases.

C. As the dollar depreciates relative to the pound, the right to buy dollars at a fixed pound exchange rate increases.

D. As the dollar appreciates relative to the pound, the right to sell dollars at a fixed pound exchange rate increases.

An options trader for a large institutional investor takes a long equity option position. Which of the following risks need to be considered when taking this position?

A. All the risks of underlying equities

II. Perceived volatility changes

III. Future dividends yields

IV. Risk-free interest rates

B. I, II

C. II, III

D. III, IV

E. I, II, III, IV

Which of the following risk measures are based on the underlying assumption that interest rates across all maturities change by exactly the same amount?

A. Present value of a basis point.

II. Yield volatility.

III. Macaulay's duration.

IV. Modified duration.

B. I and II

C. I, II, and III

D. I, III, and IV

E. I, II, III, and IV

Which of the following statements are reasons for mathematical valuation and risk assessment models to be misleading or inaccurate?

A. There could be missing factors in models.

II. The data used as input for the model could be bad or wrong.

III. Model results could be misinterpreted.

IV. There could be errors in the derivation of the model.

B. I, II, III IV

C. III and IV

D. I, II, and III

E. I, III, and IV