✅ Correct — IFRS requires classification based on the borrower's right at the reporting date; because the waiver was obtained after year-end, the borrower did not have the right to defer settlement for 12 months at 31 December, so it is current. US GAAP permits non-current classification if a waiver is obtained before the financial statements are issued and it extends at least 12 months from the balance sheet date.

❌ Incorrect — Under IFRS, a post–reporting date waiver does not change classification at the balance sheet date; the liability is current because the right to defer did not exist at 31 December.

❌ Incorrect — Under US GAAP, a timely waiver that extends beyond one year allows non-current classification despite the year-end breach.

❌ Incorrect — While this feature also lowers the coupon rate compared to a standard straight bond (because it favors the investor), the upside is capped at par value. The equity conversion option has unlimited upside potential.

✅ Correct — Granting investors the right to convert into equity (convertible bond) is highly valuable to them, so issuers can offer the lowest coupon relative to otherwise similar bonds.

❌ Incorrect — A call option benefits the issuer; investors demand additional yield to compensate for call risk and reinvestment risk, leading to a higher coupon.

❌ Incorrect — The portfolio is benchmarked with controlled tracking error, which aligns with an investor mandate aiming for market-like returns with small active bets.

❌ Incorrect — The use of systematic signals to seek modest outperformance is a form of information-driven active risk; this label is more fitting than a hedging label.

✅ Correct — The fund is not offsetting a specific business risk or stabilizing an existing exposure. It manages a benchmark-relative portfolio with modest active tilts, so a hedging label least fits the stated objective.

✅ Correct — REITs typically avoid corporate-level income taxation by distributing most taxable income, so the income is generally taxed once at the investor level rather than being taxed at both corporate and shareholder levels.

❌ Incorrect — The common advantage is reduced or eliminated entity-level tax when distribution requirements are met; taxation typically occurs at the investor level on the distributions received.

❌ Incorrect — A common disadvantage is that many REIT distributions are taxed as ordinary income, so preferential dividend rates are not the defining tax advantage of REITs.

❌ Incorrect — Higher domestic inflation without nominal depreciation makes domestic goods relatively pricier, not cheaper.

✅ Correct — With higher domestic inflation and no nominal change, domestic goods become relatively more expensive, implying a real appreciation and reduced external competitiveness.

❌ Incorrect — A relative inflation differential changes the real exchange rate even if the nominal rate is unchanged.

❌ Incorrect — The cost of equity rises with leverage in Proposition II; with no taxes, WACC does not fall.

❌ Incorrect — With riskless debt in the no-tax world, the cost of debt is assumed flat and WACC remains constant despite higher debt-to-equity.

✅ Correct — Under M&M without taxes, the cost of equity rises with D/E per Proposition II, the cost of debt is assumed flat (riskless debt), and WACC stays equal to the cost of equity of an unlevered firm for all leverage.

✅ Correct — More replications reduce simulation noise in percentile estimates but do not change the underlying sampling properties of the estimator or fix small-sample bias.

❌ Incorrect — Increasing replications does not remove estimator bias or coverage issues driven by a small sample size.

❌ Incorrect — Replications do not change the true sampling variance; they only improve the precision of its estimate.

❌ Incorrect — Standard IV(B) explicitly requires written consent from all parties involved before accepting additional compensation. Mere verbal notification or general "awareness" is insufficient; there must be a formal record of the permission.

✅ Correct — Standard IV(B) Additional Compensation Arrangements requires written consent from the employer and any other parties involved before accepting compensation that could create a conflict. Recommended procedures include obtaining prior written approval and keeping records of any such arrangements.

❌ Incorrect — Disclosure to other clients is not required; the issue is written consent from the employer and involved parties.

❌ Incorrect — Risk does not fall linearly with the number of securities; beyond a modest number of holdings, the marginal reduction in total variance becomes very small.

❌ Incorrect — Holding more securities than the index does not inherently increase variance; portfolio risk is driven by factor exposures and correlations, not by exceeding some threshold count.

✅ Correct — Diversification rapidly reduces unsystematic risk at first, but incremental benefits shrink as more correlated securities are added, causing portfolio risk to converge toward systematic risk.

✅ Correct — Futures are forward commitments with mutual obligations; options and CDS payoffs are contingent on defined conditions.

❌ Incorrect — A futures contract is not a contingent claim, and a CDS is not a forward commitment.

❌ Incorrect — Options and CDS are contingent claims because their payoffs are triggered by conditions, not unconditional obligations.