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Financial Risk Manager Part 1

Financial Risk Manager Part 1

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An asset management firm's risk manager is conducting a scenario analysis to evaluate the effect of a potential interest rate change on a 2-year forward contract for stock MTE. The analysis uses the following parameters: the current price of stock MTE is USD 67.68, the risk-free interest rate is -0.70% per annum compounded annually, and the annualized dividend yield is 0.44%. The task is to find the most accurate estimate for the change in the forward contract's value per share of MTE if there is an immediate 1% increase in the risk-free interest rate, under the assumptions that the contract is fairly valued and dividends are reinvested.

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