HP HP2-I69 Dumps Deutsch - HP2-I69 Exam Fragen, HP2-I69 Originale Fragen - Championlandzone

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  • Vendor : HP
  • Certifications : HP Certification
  • Exam Name : LF Design Lite Production Specialist 2024
  • Exam Code : HP2-I69
  • Total Questions : 376 Q&As
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VCE Exam Simulator is a test engine designed specifically for certification exam preparation. It allows you to create, edit, and take practice tests in an environment very similar to an actual exam.
SKU: HP2-I69 Categories: ,

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    Mary Rolle and Betty Sims are portfolio managers for RS Global Investments, located in Toronto, Canada.
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    Portfolio value in euros 2,000,000
    Desired beta value 1.80
    Current portfolio beta 0.60
    Beta of futures contract 1.02
    Value of one futures contract in euros 110,000
    RS is also invested in British and Argentine stocks. RS has taken a position in two main sectors of the British economy. The first sector consists of manufacturers who derive a great deal of their business from exporting to the United States and Canada. The other sector consists of British service firms who are largely immune from international competition, because most of their business is localized and cannot be provided by foreign firms. The main investment in the Argentine stocks consists of firms who provide cellular phone service to Argentine consumers. Rolle and Sims discuss which currency positions RS should hedge.
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    Sims discusses the return for this security when hedged with a short position in Treasury bond futures.
    Rolle and Sims further discuss how to hedge the risk of mortgage securities. Rolle states that two Treasury bond futures contracts are typically used instead of just one. Sims states that a hedge becomes more important if the volatility of interest rates increases.
    Assuming interest rates fall, what is the most likely performance for the CWC International mortgage when hedged with a short position in Treasury bond futures?
    A. The return will be weak due to the hedge.
    B. The return will be the risk-free rate due to the hedge.
    C. The return will be high due to the high coupon.
    Answer: A
    Explanation:
    Explanation/Reference:
    Explanation:
    The CWC International mortgage has a higher coupon rate than newly issued mortgages. As such, it is likely to be called (i.e., homeowners will refinance) when interest rates decline and has negative convexity (just as with any callable bond). If rates decline, the mortgage price rise will be capped at the call price.
    The price rise in the mortgage will be less than the loss in the short futures position. Thus, the mortgage and hedge combination would have a weak return if interest rates fall. (Study Session 10, LOS 32.a)

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