BAFI3273 W11 Trading simulations

What is correct about fixed-income analysis?

• Fixed-income analysis only applies to stocks and equity securities.
• It primarily focuses on real estate investments and their returns.
• Fixed-income analysis focuses on evaluating the risk and return of bonds and other fixed-income securities.
• Fixed-income analysis disregards interest rate changes and their impact on securities.

What is the characteristic of cash-flow matching strategy for fixed-income portfolio?

• The characteristic of cash-flow matching strategy is that it aligns cash inflows from investments with cash outflows for liabilities.
• It involves investing in high-risk assets for quick gains.
• It requires frequent trading to adjust for market fluctuations.
• It focuses solely on maximizing investment returns.

Which of the following best describes the concept of immunization in bond portfolio management?

• Immunization aims to protect the portfolio from interest rate fluctuations by matching the duration of assets and liabilities.

• It involves investing only in government bonds to reduce risk.

• It focuses on short-term trading to capitalize on market movements.

• It requires a constant adjustment of the portfolio to maintain a specific yield.

What is a key advantage of using a cash-flow matching strategy?

• It allows for higher returns by investing in volatile assets.

• It provides certainty in meeting future cash obligations without relying on market conditions.

• It simplifies the investment process by reducing the number of trades required.

• It eliminates the need for financial forecasting.

What is the bid price?

• The price at which a security is currently trading in the market.
• The average price of a security over a specific period.
• The maximum price a buyer is willing to pay for a security or asset.
• The lowest price a seller is willing to accept for a security or asset.

What is the difference between bid and ask prices from the view of price takers?

• The bid price is always higher than the ask price.
• Price takers benefit from the difference between bid and ask prices.
• The bid and ask prices are the same for price takers.
• The difference between bid and ask prices is the transaction cost for price takers.

What is the role of the ask price in a financial market?

• The ask price is irrelevant in a liquid market.

• The ask price is the maximum price a buyer is willing to pay for a security or asset.

• The ask price is the average price of a security over a specific period.

• The ask price is the minimum price a seller is willing to accept for a security or asset.

What is the primary objective of a liability-driven investment strategy?

• To maximize returns by investing in high-risk assets.

• To ensure that the investment portfolio can meet future liabilities as they come due.

• To minimize transaction costs associated with trading.

• To focus on short-term trading opportunities in the market.