1. A bond portfolio manager wants to reduce the average duration of his portfolio consisting of fixed-rate government securities without selling any security. He will most likely:

A. buy fixed-rate government bond futures.
B. sell corporate bonds.
C. execute a pay-fixed interest rate swap.

2. You have the following information related to a covered call position: stock price when option position opened = 20.00; option exercise price = 25.00; call premium received = 1.33. What is the maximum profit and breakeven stock price from writing a covered call?

A. Max Gain = 5.00; Breakeven = 23.67.

B. Max Gain = 6.33; Breakeven = 18.67

C. Max Gain = 6.40; Breakeven = 21.33

3. An investor with a long stock position may establish a collar by:

A. buying a put at a lower exercise price than the current stock price and writing a call at a higher exercise price than the current stock price.

 

B.  buying a put at a higher exercise price than the current stock price and writing a put at a lower exercise price than the current stock price.
C. buying a call at a lower exercise price and selling a call at a higher exercise price than the current stock price.
 

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