Exam (elaborations)
SOA IFM EXAM
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Exam of 40 pages for the course SOA IFM at SOA IFM (SOA IFM EXAM)
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SOA IFM EXAMSOA IFM
Evatee 10/10/24 SOA IFM
,SOA IFM EXAM
Derivative Security (Chp. 1) Answer - A financial instrument whose value
depends on another security.
Option (Chp. 1) Answer - An agreement allowing the buyer of the option to
buy or sell an asset at a specific price on a specific day.
Clearinghouses (Chp. 1) Answer - Matches the buyers and the sellers and
keeps track of their obligations and payments.
Measures of Market Size and Activity (Chp. 1) Answer - 1) Trading Volumne
2) Market Value
3) Notional Value
4) Open Interest
Purpose of Derivatives (Chp. 1) Answer - 1) Risk Management
2) Speculation
3) Reduced Transaction Costs
4) Regulatory Arbitrage
Hedging (Chp. 1) Answer - Guaranteeing a buying or selling price.
Derivative Perspectives (Chp. 1) Answer - 1) End User
2) Market-Maker
3) Economic Observer
,Bid Price (Chp. 1) Answer - The amount that a person will pay for an asset.
Offer Price/Ask Price (Chp. 1) Answer - The price an asset can be bought for.
Bid-Ask Spread (Chp. 1) Answer - The difference between the bid and ask
prices.
Stock Orders (Chp. 1) Answer - 1) Market Order
2) Limit Order
3) Stop Loss Sales Order
Market Order (Chp. 1) Answer - Pays the market price (ask/bid) to buy or sell
stock immediately.
Limit Order (Chp. 1) Answer - Specifies the max buying price or min selling
price and not fulfilled until that price is avaliable.
Stop Loss Sales Order (Chp. 1) Answer - Specifies that the stock is sold if the
price decreases to the specified amount.
Long Position (Chp. 1) Answer - Positive number of units in which the
instrument was bought.
Short Position (Chp. 1) Answer - Negative number of units in which the
instrument was sold.
Short Selling Purposes (Chp. 1) Answer - 1) Speculation
2) Financing
, 3) Hedging
Lease Rate (Chp. 1) Answer - The annual cost of holding an asset as a
percentage of the asset value.
Repo Rate/Short Rate (Chp. 1) Answer - Repo: interst rate paid by the lender
for bonds.
Short: interst rate paid by the lender for stocks.
Cost of Capital (Chp. 2) Answer - Interest rate paid to investors of the project.
NPV [Formula] (Chp. 2) Answer -
NPV Perpetuity [Formula] (Chp. 2) Answer - NPV = 1/i
NPV Growth Rate [Formula] (Chp. 2) Answer - NPV = 1/(i-g)
Break - Even Analysis (Chp. 2) Answer - Determine the value of each
assumption parameter for which the NPV is 0.
IRR (Chp. 2) Answer - Internal Rate of Return
Sensitivity Analysis (Chp. 2) Answer - Caluclating the change in the NPV
resulting from a change in a parameter.
Scenario Analysis (Chp. 2) Answer - Calculate the NPV for various scenarios.
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