chapter2金融工程

1 ÙThe Time Value of Money

!ÀJ K

1.A bank must satisfy certain creditworthiness criteria in order to be able to accept

a LIBOR quote from another bank and receive deposits from that bank at LIBOR.

Typically it must have to have a£¤credit rating.

A.AAA

B.AA

C.Aaa

D.Aa

2.Derivatives traders regard£¤rates as a better indication of the”true”risk-free rate

than Treasury rates.

A.LIBOR

B.NIBOR

C.HIBOR

D.SIBOR

3.The most common type of repo is an£¤,in which the agreement is renegotiated

each day.

A.everyday repo

B.overnight repo

C.data repo

D.term repo

4.The n-year zero-coupon interest rate is sometimes also referred to as the n-year£¤,

the n-year£¤,or just the n-year£¤.

A.zero rate

B.par rate

C.spot rate

D.zero

5.The£¤for a certain bond maturity is the coupon rate that causes the bond price

to equal its par value£The par value is the same as the principal value¤.

A.bond yield

B.spot rate

C.par yield

D.forward rate

6.A largefinancial institution can at no cost lock in the forward rate for a future time

period,so the value of the FRA where the forward rate is earned is£¤.

A.positive

B.negative

C.zero

D.unknown

1

21 ÙTHE TIME VALUE OF MONEY

7.A zero-coupon bond that lasts n years has a duration of n years.However,a coupon-

bearing bond lasting n years has a duration of£¤n years,because the holder receives some of the£¤payments prior to year n.

A.more than

B.less than

C.interest

D.principal

8.There is a£¤relationship between bond prices and bond yields.When bond yields

increase,bond prices£¤.When bond yields decrease,bond prices£¤.

A.positive

B.negative

C.increase

D.decrease

9.Theories of the term structure of interest rates mainly include£¤

A.expectations theory

B.risk value theory

C.liquidity preference theory

D.market segmentation theory

!§äK(3 ( K )ÒS y”√”§ Ø K )ÒS y”×”)

1.The higher the credit risk§the higher the interest rate that is promised by the

borrower.()

2.Treasury rates are regarded as risk-free rates©()

3.Derivatives traders do not usually use Treasury rates as risk-free rates,instead they

use LIBID rates.()

4.The limit as the compounding frequency,m,tends to infinity is known as continuous

compounding.For most practical purposes,con tinuous compounding can be thought of as being equivalent to monthly compounding.()

5.A largefinancial institution can at no cost lock in the forward rate for a future time

period,so the value of the FRA where the forward rate is earned is zero.()

6.A zero-coupon bond that lasts n years has a duration of n years.However,a coupon-

bearing bond lasting n years has a duration of less than n years,becaus e the holder receives some of the principal payments prior to year n.()

7.The bond price is thefinal value of all payments.The duration is therefore a weighted

average of the times when payments are made,with the weight applied to time t i being equal to the proportion of the bond’s totalfinal value provided by the cash flow at time t i.()