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Q9. Patsy Cain works in the alternative investment division for a global investment bank. This morning she received a questionnaire from Michael Garland, a computer-industry executive looking for someone to handle a portion of his investment portfolio. Cain had sent him the questionnaire a week ago in an effort to determine whether he was a good candidate for money management.
When asked about his investment experience, Garland responded that he has been actively investing in a variety of asset classes for more than 30 years, with considerable success overall. Tax issues are a concern, as Garland receives a large amount of dividend income from the company he owns and he also operates several charitable foundations funded by both himself as well as outside donors.
Garland also wrote that he does not like gambling or tobacco companies and can afford to tie up his money for no more than five years because he intends to retire at that time.
After Cain returns the questionnaire, Garland calls for an appointment. When he meets with Cain, he explains that another manager has done a fine job with his stocks and bonds, but he is not happy with the performance of his alternative investments and wants her to manage them. Cain still is not sure what kind of investments would be best for Garland, so she asks him to rank his investment goals in order of importance. They are:
1. Returns.
2. Diversification.
3. Ease of tracking.
Garland is very interested in commodities. He owns a chemical company that makes food additives and flavorings, and he uses a lot of corn and other grains in his products. Rather than buy grains at market prices, Garland would like to purchase quantities of grain for his own use, store it in his own warehouse, and sell any excess. Alternatively, he could use futures contracts to guarantee prices for purchases at a future date.
Cain decides that Garland is a likely candidate for commodity investments. When she suggests futures to him, Garland explains that he got burned on a natural-gas investment once and is nervous about commodities because of their price volatility. Cain advises him to stick with oil futures rather than natural-gas futures, offering four reasons for the advice:
- "Oil prices are similar worldwide, while natural-gas prices differ by region."
- "Seasonal trends in oil prices are well documented."
- "Forward prices for oil tend to be less volatile than prices for natural gas."
- "Oil is easier to transport than natural gas."
Garland is also interested in hedge funds, though he is concerned about their potential volatility. Cain makes a mental note to assemble a list of hedge funds with high Sharpe ratios. Hedge funds appeal to Garland mostly because of their willingness to take both long and short positions. He postulates that a hedge fund that takes only long positions might as well be a mutual fund.
Which of the following statements about oil and natural-gas futures is least accurate?
A) "Forward prices for oil tend to be less volatile than prices for natural gas."
B) "Seasonal trends in oil prices are well documented."
C) "Oil prices are similar worldwide, while natural-gas prices differ by region."
Q10. Based only on Garland's four stated investment goals, his best option is:
A) oil futures.
B) publicly traded real-estate infrastructure equity units.
C) a market-neutral hedge fund.
Q11. In selecting hedge funds for Garland, Cain should avoid:
A) hedged-equity funds.
B) merger-arbitrage funds.
C) emerging-market funds.
Q12. With regards to measuring the volatility of hedge funds, which of the following is least likely to be a limitation of the Sharpe ratio?
A) its time-dependency makes volatility appear higher over long periods.
B) funds with large private-equity positions will appear less volatile than they actually are.
C) it is not effective for selecting good hedge-fund investments.
Q13. Based on Garland's response to the questionnaire, the issue most likely to cause Cain NOT to take him on as a client is:
A) suitability.
B) tax complexities.
C) decision risk.
Q14. Regarding Garland's plan to purchase grain for his company's use, Cain should begin by advising him about:
A) lease rates.
B) convenience yield.
C) storage costs.
Q15. It is currently August and the spot price of soybeans is $6.02/bushel. Storage costs for soybeans on a continuously compounded basis are $0.39/bushel annually. The appropriate continuously compounded interest rate is 8%. If a soybean farmer has just finished harvesting his crop but would like to sell half of the crop in November and half in February by going short futures contracts, which of the following statements is most accurate? The farmer should store his crop only if the November futures contract price is at least:
A) $6.77/bushel and the February futures contract price is at least $6.27/bushel.
B) $6.24/bushel and the February futures contract price is at least $6.47/bushel.
C) $6.14/bushel and the February futures contract price is at least $6.27/bushel.
Q16. Which of the following statements regarding lease rates is least accurate? The lease rate is:
A) earned whether or not the underlying commodity is actually loaned.
B) the amount of interest a lender of a commodity requires.
C) the amount of return the investor requires to buy and then lend a commodity.
Q17. A producer of soybean meal and soybean oil wishes to hedge with soybean contracts. The convenience yields and storage costs for soybean meal and soybean oil are significantly different from that of soybeans. Which of these differences, if any, could be a source of basis risk?
A) Both convenience yields and storage costs.
B) Convenience yields only.
C) Neither convenience yields nor storage costs.
Q18. Soybeans have seasonal production but constant demand throughout the year. Soybean forward contracts currently have an upward sloping forward curve. Under these conditions, we would expect the forward curve to:
A) decrease until harvest time and then drop more sharply at harvest time.
B) increase until harvest time and then drop sharply at harvest time.
C) decrease until harvest time and then increase sharply at harvest time.
Q19. Jill Mahoney, CFA, has noticed that the forward prices for a given commodity have exhibited contango. Regulatory changes concerning the storage of the underlying commodity have recently increased the storage costs. This will most likely lead to:
A) a steeper forward curve and continued contango.
B) a flatter forward curve but contango will still exist.
C) a flatter forward curve and possibly normal backwardation. | 
发表于 2009-3-11 10:39
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