Need explanation of the given answers Question 1: Which one of the following identifies the risk transformation achieved

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Need explanation of the given answers
Question 1: Which one of the
following identifies the risk transformation achieved by a forward
contract?
a) Business risk into systemic risk
b) Business risk into credit risk
c) Credit risk into business risk
d) Credit risk into liquidity risk
e) Systemic risk into business risk
Question 2: Which one of the following is not
an underlying assumption of the futures valuation model?
c) The underlying instrument is tradable on the spot market
a) A trader can open unlimited short-selling positions
b) A trader can lend and borrow indefinitely at the risk-free
rate
e) Futures prices converge to the spot price as the
maturity dates approach
d) Transaction costs are zero
Question 3: Which one of the following
statements about futures trading is true?
a) For a longing counterparty, a decrease in the futures price
cannot lead to a margin call
b) For a shorting counterparty, an increase in the
futures price can lead to a margin call
c) The current margin net of initial margin is always equal to
the counterparty’s net payoff
d) The initial margin is always lower than the margin call
threshold
e) A margin call is triggered when the value of current margin
goes below zero
Question 4: Which one of the following
statements about futures is true?
a) Equity futures prices are lower when the expected dividend
for an underlying stock is lower
b) Commodity futures prices are higher when storage
costs are higher
c) If futures prices are lower than the current spot price,
opportunities for arbitrage exist
d) There are future contracts available for trading with
delivery specified at any trading day
e) Long futures contracts are primarily used to manage the
supply chain
Question 5: Which one of the following
statements about futures and forwards is true?
a) All futures are traded over the counter
b) All forwards are traded on exchanges
c) Forwards contracts are rarely held until physical
delivery
d) Strategic defaults are more likely for futures than for
forwards
e) There are typically no margin requirements for
forwards trading
Question 11: Which one of the following
statements about options is true?
a) Put options are exercised out-of-the-money
b) Call options are exercised in-the-money
c) Writing an option leads to potentially unlimited upside
d) Holding an option leads to limited
downside
e) Spreads in option trading refer to differences in premiums
between calls and puts for the same strike price
Question 12: Which one of the following
statements about options is true?
a) An investor is always able to write a call option at the ask
price
b) An investor is always able to buy a put option at the bid
price
c) The premium of a call option with a lower strike
price, all other things held equal, should be higher
d) The premium of a put option with a lower strike price, all
other things held equal, should be higher
e) The premium of a put option with a lower maturity, all other
things held equal, should be higher
Question 13: All other things held equal,
identify which one of the following statements about vanilla option
premiums is true
a) American options have lower premiums
b) European options have lower premiums
c) The premiums on American and European options would be
equal
d) The premiums on American options would be higher if
volatility is low, the premiums on European options would be higher
if volatility is high
e) The premiums on American puts would be higher while the
premiums on European calls would be higher
Question 14: Identify which one of the
following pairs of option strategies, at equilibrium, would be
expected to deliver equivalent payoffs
a) Short strangle and condor
b) Bullish spread with puts and bullish spread with calls
c) Short put and long call
d) Protective put and long call
e) Covered call and long put
Question 15: Which of the following statements
about option strategies is false?
a) The maximum downside of a strangle is lower than that of a
straddle
b) The maximum upside of a condor is lower than that of a
butterfly
c) The maximum upside of a short straddle is limited
d) The maximum upside of a long strangle is unlimited
e) The maximum downside of a strap is lower than that of
a strangle
Question 16: Which of the following statements
about option strategies is true?

a) A butterfly is a net credit trade
b) A bearish call spread is a net debit trade
c) A short straddle is a net credit trade
d) A bullish put spread is a net debit trade
e) A strangle is a net credit trade
Question 17: Identify which forecast is
consistent with a condor strategy
a) Bullish on direction, bullish on volatility
b) Bearish on direction, bearish on volatility
c) Bullish on direction, bearish on volatility
d) Neutral on direction, bearish on
volatility
e) Neutral on direction, bullish on volatility
Question 18: Assume that current underlying
share price is 104.9p and the implied volatility is 31% per annum.
If an investor believes the annualised volatility of the underlying
share price will be 36% and the share price at the expiry date will
be 119.1p per share, identify which one of the following strategies
will be consistent with their forecast
a) Long put
b) Butterfly
c) Strangle
d) Strip
e) Strap
Question 25: Which of the following statements
about credit default swaps is true?
a) Credit default swaps can only be used for hedging
b) In case of default, the protection seller must always
compensate the full par value of the underlying debt
c) All other things held equal, if the swap rate increases, the
expected net payoff of the protection seller decreases
d) All other things held equal, if the recovery rate
increases, the expected net payoff of the protection buyer
decreases
e) Basket default swaps always protect against defaults of all
underlying debts in the basket
Question 26: Which one of the following
statements about credit default swap valuation is true?
a) All other things held equal, the swap rate is higher
if defaults are assumed to occur at the start of the year instead
of mid-year
b) All other things held equal, a higher cost of finance
corresponds to a lower swap rate
c) All other things held equal, a longer-term swap corresponds
to a higher swap rate
d) All other things held equal, a higher probability of default
corresponds to a lower credit default swap rate
e) All other things held equal, a higher recovery rate
corresponds to a higher credit default swap rate
Question 27: Which one of the following
statements about swaps is false?
a) The cash flows in the vanilla interest rate swap are
denominated in the same currency for both counterparties
b) The net payoffs of the counterparties in an interest rate
swap always add up to zero
c) A currency swap can only be motivated by absolute or
comparative advantage of counterparties in terms of borrowing
rates
d) In currency swaps, both principal and interest are
exchanged
e) A collar is a combination of a cap and a floor
Question 28: Which one of the following
statements about interest rate swaps is true?
a) The replication strategy for an interest rate swap for the
floating-receiving counterparty involves longing a fixed rate note
and shorting a floating rate bond
b) If interest rates increase, the payoff of the counterparty
receiving fixed in the swap increases
c) For interest rate swaps, setting a floor is
equivalent to the fixed-receiving counterparty writing a put option
for the floating-receiving counterparty
d) For interest rate swaps, setting a cap is equivalent to the
fixed-receiving counterparty writing a call option for the
floating-receiving counterparty
e) The notional principal is exchanged for interest rate
swaps