Assume an FI Holds Three Different Positions

question 17

Multiple Choice

Assume an FI holds three different positions.The following DEAR information is available for the positions.Position 1 is a five-year zero-coupon bonds with DEAR of $12 500, position 2 is a CHF spot contract with DEAR of $9500 and the third position are Australian equities with DEAR of $34 500.Which of the following statements is true in relation to these positions?

• A)The DEAR of the portfolio can be calculated by simply adding up the individual DEARs.
• B)The DEAR of the portfolio can be calculated by simply multiplying the individual DEARs.
• C)The DEAR of the portfolio can be calculated by simply adding up the individual DEARs and adjusting the sum by an error factor gamma.
• D)None of the listed options are correct.