Which one of the following statements about futures contracts is correct?
I. Futures contracts are subject to the same risks as the underlying instruments.
II. Futures contracts have additional interest rate risk die to the future delivery date.
III. Futures contracts traded in a clearinghouse system are exposed to credit risk with numerous counterparties.

• A.I
• B.I, II, III
• C.II, III
• D.I, III

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Which one of the following statements describes Macauley's duration?

• A.The change in value of a bond when yields increase by 1 basis point.
• B.The present value of the future cash flows of a bond calculated at a yield equal to 1%.
• C.The percentage change in a bond price when the yields change by 1%.
• D.The weighted average life of the bond payments.

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A trader attempts to hold long positions when markets are rising and hold short positions when markets are
falling. Which one of the following four trading styles is she likely to use?

• A.Black box trading
• B.Market timing trading
• C.Technical trading
• D.Contrarian trading

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The Sarbanes-Oxley Act includes one of the following four requirements for financial institutions in the
United States:

• A.Capital allocation requirements
• B.Market discipline requirements
• C.Risk and control requirements
• D.Regulatory response to systemic risk requirements

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Gamma Bank has a significant number of retail customers and finds its balance sheet shape and structure
difficult to manage. Which one of the following characteristics of a bank with wide retail operations is
INCORRECT?

• A.Banks with a wide retail base are typically driven by contractual obligations and not simply relationship
  considerations.
• B.Attracting and retaining customers often involves offering retail products whose features are different
  from wholesale market products.
• C.The way retail customers behave in relation to the retail banking products they hold often results in the
  apparent contractual obligation of the parties providing a poor description of the actual nature of the
  obligations.
• D.Pricing of retail products often has more to do with marketing considerations rather than prevailing
  market price.

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