1) Assume Prime Ltd is a company that invests in various office property markets in Asia

1) Assume Prime Ltd is a company that invests in various office property markets in Asia. To fund these property acquisitions, Prime Ltd uses, fixed rate mortgage loans in the currency of the country in which the property was acquired. How can Prime Ltd. use swaps to hedge the risk(s)?

Group of answer choices

Exchange fixed for floating interest rates and local to foreign currency in a cross-currency swap

Exchange fixed for floating interest rates in an interest rate swap

Exchange fixed for floating interest rates in a cross-currency swap

Exchange fixed for floating interest rates and local to foreign currency in an interest rate swap

2. The advantage of a ‘cap and collar’ arrangement compared to an interest rate swap to hedge interest rate risk is:

Group of answer choices

It allows to take advantage of favourable price movements to a certain limit

It locks in an interest rate

It does not involve a dealer

All of the above

3. With respect to a “call butterfly spread” option strategy which of the following statements is most correct?

Group of answer choices

the buyer of a call butterfly spread anticipates that the underlying asset price will move significantly in either direction

the writer of a call butterfly spread will profit whichever way the price of the underlying asset moves

the writer of a call butterfly spread anticipates that the price of the underlying asset will not move significantly

the buyer of a call butterfly spread anticipates that the price of the underlying asset will increase slightly

4. American call options on shares are rarely exercised before expiry date because:

Group of answer choices

it sacrifices the option’s time value

it never pays to exercise before a share goes ex-dividend

it is too risky to exercise an option before its expiry date

it sacrifices the option’s intrinsic value

5. Which of the following is true?

Group of answer choices

A long call is the same as a short put

None of the above (picked)

A call on a stock plus a stock is the same as a put

A short call is the same as a long put