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NEW QUESTION: 1
Dakota Watson and Anthony Smith are bond portfolio managers for Northern Capital Investment Advisors, which is based in the U.S. Northern Capital has $2,000 million under management, with S950 million of that in the bond market. Northern Capital's clients are primarily institutional investors such as insurance companies, foundations, and endowments. Because most clients insist on a margin over the relevant bond benchmark, Watson and Smith actively manage their bond portfolios, while at the same time trying to minimize tracking error.
One of the funds that Northern Capital offers invests in emerging market bonds. An excerpt from its prospectus reveals the following fund objectives and strategies:
"The fund generates a return by constructing a portfolio using all major fixed-income sectors within the Asian region (except Japan) with a bias towards non-government bonds. The fund makes opportunistic investments in both investment grade and high yield bonds. Northern Capital analysts seek those bond issues that are expected to outperform U.S. bonds with similar credit risk, interest rate risk, and liquidity risk-Value is added by finding those bonds that have been overlooked by other developed world bond funds. The fund favors non-dollar, local currency denominated securities to avoid the default risk associated with a lack of hard currency on the part of issuer." Although Northern Capital does examine the availability of excess returns in foreign markets by investing outside the index in these markets, most of its strategies focus on U.S. bonds and spread analysis of them.
Discussing the analysis of spreads in the U.S. bond market, Watson comments on the usefulness of the option adjusted spread and the swap spread and makes the following statements:
Statement 1: Due to changes in the structure of the primary bond market in the U.S., the option adjusted spread is increasingly valuable for analyzing the attractiveness of bond investments.
Statement 2: The advantage of the swap spread framework is that investors can compare the relative attractiveness of fixed-rate and floating-rate bond markets.
Watson's view of the U.S. economy is decidedly bearish. She is concerned that the recent withdrawal of liquidity from the U.S. financial system will result in a U.S. recession, possibly even a depression. She forecasts that interest rates in the U.S. will continue to fall as the demand for loanable funds declines with the lack of business investment. Meanwhile, she believes that the Federal Reserve will continue to keep short-term rates low in order to stimulate the economy. Although she sees the level of yields declining, she believes that the spread on risky securities will increase due to the decline in business prospects. She therefore has reallocated her bond portfolio away from high-yield bonds and towards investment grade bonds.
Smith is less decided about the economy. However, his trading strategy has been quite successful in the past. As an example of his strategy, he recently sold a 20-year AA-rated $50,000 Mahan Corporation bond with a 7.75% coupon that he had purchased at par. With the proceeds, he then bought a newly issued A- rated Quincy Corporation bond that offered an 8.25% coupon. By swapping the first bond for the second bond, he enhanced his annual income, which he considers quite favorable given the declining yields in the market.
Watson has become quite interested in the mortgage market. With the anticipated decline in interest rates, she expects that the yields on mortgages will decline. As a result, she has reallocated the portion of Northern Capital's bond portfolio dedicated to mortgages. She has shifted the holdings from 8.50% coupon mortgages to 7.75% coupon mortgages, reasoning that if interest rates do drop, the lower coupon mortgages will rise in price more than the higher coupon mortgages. She identifies this trade as a structure trade.
Smith is examining the liquidity of three bonds. Their characteristics are listed in the table below:
Regarding the statements made by Watson on the usefulness of the option adjusted spread and the swap spread, are both statements correct?
A. Yes.
B. No, only statement 2 is correct.
C. No, both statements are incorrect.
Answer: B
Explanation:
Explanation/Reference:
Explanation:
Statement 1: In the primary bond market in the U.S., there are a declining number of callable and putable bonds being sold. The option adjusted spread accounts for options imbedded in bonds and is therefore becoming less useful for analyzing the attractiveness of bond investments. Thus, Watson is incorrect.
Statement 2: Watson is correct. Swap spread analysis allows a fixed rate bond to be transformed into a floating rate bond, and vice versa. It is therefore useful in comparing the relative attractiveness of fixed-rate and floating-rate bond markets, (Study Session 9, LOS 30.b, e)
NEW QUESTION: 2
Your network contains an Active Directory domain. The domain contains two Active Directory sites named Site1 and Site2. Site1 contains two domain controllers named DC1 and DC2. Site2 contains two domain controller named DC3 and DC4. The functional level of the domain is Windows Server 2008 R2. The functional level of the forest is Windows Server 2003. Active Directory replication between Site1 and Site2 occurs from 20:00 to
01:00 every day.
At 07:00, an administrator deletes a user account while he is logged on to DC1.
You need to restore the deleted user account. You want to achieve this goal by using the minimum amount of administrative effort.
What should you do?
A. On DC3, run the Restore-ADObject cmdlet.
B. On DC3, stop Active Directory Domain Services, perform an authoritative restore, and then start Active Directory Domain Services.
C. On DC1, run the Restore-ADObject cmdlet.
D. On DC1, stop Active Directory Domain Services, restore the System State, and then start Active Directory Domain Services.
Answer: B
Explanation:
We cannot use Restore-ADObject, because Restore-ADObject is a part of the Recycle Bin feature, and you can only use Recycle Bin when the forest functional level is set to Windows Server 2008 R2. In the question text it says "The functional level of the forest is Windows Server 2003." See http://technet.microsoft.com/nl-nl/library/dd379481.aspx Performing an authoritative restore on DC3 updates the Update Sequence Number (USN) on that DC, which causes it to replicate the restored user account to other DC's. Reference 1: MS Press - Self-Paced Training Kit (Exam 70-640) (2nd Edition, July 2012) page 692 An authoritative restore restores data that was lost and updates the Update Sequence Number (USN) for the data to make it authoritative and ensure that it is replicated to all other servers. Reference 2: http://technet.microsoft.com/en-us/library/cc755296.aspx Authoritative restore of AD DS has the following requirements: You must stop the Active Directory Domain Services service before you run the ntdsutil authoritative restore command and restart the service after the command is complete.
NEW QUESTION: 3
You need to have an open service request (SR) with Technical Support to upload your ProxySG configuration information to Blue Coat directly from the Management Console.
A. True
B. False
Answer: A
Explanation:
Reference:
www.bluecoat.com/doc/687
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