Question 1

In reference to the derivatives market,a "hedger"

Accepted Answer

A) attempts to profit from a change in the futures price 
B) wants to avoid price variation by locking in a purchase price of the underlying asset through a long position in the futures contract or a sales price through a short position 
C) plays a zero-sum game 
D) b and c 
A) attempts to profit from a change in the futures price 
B) wants to avoid price variation by locking in a purchase price of the underlying asset through a long position in the futures contract or a sales price through a short position 
C) plays a zero-sum game 
D) b and c B

Question 2

Suppose the Canadian Wheat Pool wants to hedge a US dollar payable using futures contracts that trade on the Chicago Mercantile exchange.

Accepted Answer

A) The Wheat Pool should buy Canadian dollar futures 
B) The Wheat Pool should sell Canadian dollar futures 
C) The Wheat Pool cannot hedge this position 
D) The Wheat Pool should not use the Chicago Mercantile exchange 
A) The Wheat Pool should buy Canadian dollar futures 
B) The Wheat Pool should sell Canadian dollar futures 
C) The Wheat Pool cannot hedge this position 
D) The Wheat Pool should not use the Chicago Mercantile exchange B

Question 3

The "open interest" shown in currency futures quotations is:

Accepted Answer

A) the total number of people indicating interest in buying the contracts in the near future 
B) the total number of people indicating interest in selling the contracts in the near future 
C) the total number of people indicating interest in buying or selling the contracts in the near future 
D) the total number of long or short contracts outstanding for the particular delivery month 
A) the total number of people indicating interest in buying the contracts in the near future 
B) the total number of people indicating interest in selling the contracts in the near future 
C) the total number of people indicating interest in buying or selling the contracts in the near future 
D) the total number of long or short contracts outstanding for the particular delivery month D

Question 4

If you have a long position in one futures contract,the changes in the margin account from daily marking-to-market,will result in the balance of the margin account after the third day to be:

Accepted Answer

A) $1,425 
B) $1,675 
C) $2,000 
D) $3,425 
A) $1,425 
B) $1,675 
C) $2,000 
D) $3,425

Question 5

In the absence of transactions costs,for the same maturity and currency

Accepted Answer

A) The futures price is always higher than the forward rate 
B) The forward rate is always higher than the futures price 
C) The futures price and the forward rate are the same 
D) The futures price and the forward rate are not related 
A) The futures price is always higher than the forward rate 
B) The forward rate is always higher than the futures price 
C) The futures price and the forward rate are the same 
D) The futures price and the forward rate are not related

Question 6

Today's settlement price on a Chicago Mercantile Exchange (CME)Euro futures contract is $1.2010/EUR.Your margin account currently has a balance of $2,500.The next two days' settlement prices are $1.2210/EUR and $1.2010/EUR.(The contractual size of one CME EURO contract is EUR 125,000).Calculate your margin account balance at the end of the first and second day if you have a long position on Euro futures.

Accepted Answer

Day 1: 2,500 + 125,0

Question 7

What is the lowest possible 1-year forward $/£ exchange rate FROM THE LIST BELOW?

Accepted Answer

A) 1.93 
B) 1.97 
C) 2.01 
D) 2.05 
A) 1.93 
B) 1.97 
C) 2.01 
D) 2.05

Question 8

When the LIBOR yield drops the

Accepted Answer

A) Value of a eurodollar futures contract drops 
B) Value of a eurodollar futures contract remains unchanged 
C) Value of a eurodollar futures contract increases 
D) Value of a eurodollar futures contract might drop or increase depending on the circumstances 
A) Value of a eurodollar futures contract drops 
B) Value of a eurodollar futures contract remains unchanged 
C) Value of a eurodollar futures contract increases 
D) Value of a eurodollar futures contract might drop or increase depending on the circumstances

Question 9

In reference to the derivatives market,a "speculator"

Accepted Answer

A) attempts to profit from a change in the futures price 
B) wants to avoid price variation by locking in a purchase price of the underlying asset through a long position in the futures contract or a sales price through a short position 
C) plays a zero-sum game 
D) b and c 
A) attempts to profit from a change in the futures price 
B) wants to avoid price variation by locking in a purchase price of the underlying asset through a long position in the futures contract or a sales price through a short position 
C) plays a zero-sum game 
D) b and c

Question 10

Today's settlement price on a Chicago Mercantile Exchange (CME)Euro futures contract is $1.2010/EUR.Your margin account currently has a balance of $2,500.The next two days' settlement prices are $1.2210/EUR and $1.2010/EUR.(The contractual size of one CME EURO contract is EUR 125,000).Calculate your margin account balance at the end of the first and second day if you have a short position on Euro futures.

Accepted Answer

Day 1: 2,500 + 125,0

Question 11

Assume that the spot Euro is $1.2000 and the six-months forward rate is $1.2100.Determine the minimum price for which a six-month American put should sell for.The strike price is $1.1900 and the annualized six-month Eurodollar rate is 4%.

Accepted Answer

P_a @#IMG-DLM& Max[(E @#IMG-DLM& S_t),(E @#IMG-DLM& F)

Question 12

An "option" is:

Accepted Answer

A) a contract giving the seller (writer) the right, but not the obligation, to buy or sell a given quantity of an asset at a specified price at some time in the future 
B) a contract giving the owner (buyer) the right, but not the obligation, to buy or sell a given quantity of an asset at a specified price at some time in the future 
C) not a derivative, nor a contingent claim, security 
D) unlike a futures or forward contract 
A) a contract giving the seller (writer) the right, but not the obligation, to buy or sell a given quantity of an asset at a specified price at some time in the future 
B) a contract giving the owner (buyer) the right, but not the obligation, to buy or sell a given quantity of an asset at a specified price at some time in the future 
C) not a derivative, nor a contingent claim, security 
D) unlike a futures or forward contract

Question 13

Which of the following statements is true?

Accepted Answer

A) The buyer of a forward contract holds a short position. 
B) The buyer of a futures contract holds a losing position. 
C) The buyer of a forward contract holds a wining position. 
D) The buyer of a futures contract holds a long position. 
A) The buyer of a forward contract holds a short position. 
B) The buyer of a futures contract holds a losing position. 
C) The buyer of a forward contract holds a wining position. 
D) The buyer of a futures contract holds a long position.

Question 14

If you have a short position in one futures contract,the changes in the margin account from daily marking-to-market will result in the balance of the margin account after the third day to be:

Accepted Answer

A) $1,425 
B) $2,000 
C) $2,325 
D) $3,425 
A) $1,425 
B) $2,000 
C) $2,325 
D) $3,425

Question 15

An investor believes that the price of a stock,say IBM's shares,will increase in the next 60 days.If the investor is correct,which combination of the following investment strategies will show a profit in all the choices?
(i)- buy the stock and hold it for 60 days
(ii)- buy a put option
(iii)- sell (write)a call option
(iv)- buy a call option
(v)- sell (write)a put option

Accepted Answer

A) (i), (ii), and (iii) 
B) (i), (ii), and (iv) 
C) (i), (iv), and (v) 
D) (ii) and (iii) 
A) (i), (ii), and (iii) 
B) (i), (ii), and (iv) 
C) (i), (iv), and (v) 
D) (ii) and (iii)

Question 16

The value of a European call will increase with all of the following except:

Accepted Answer

A) the spot exchange rate 
B) the exercise price 
C) time to maturity 
D) the foreign interest rate 
A) the spot exchange rate 
B) the exercise price 
C) time to maturity 
D) the foreign interest rate

Question 17

Given the following information:   If your expectations prove correct at maturity:
a)What would be your profit per euro from speculating in the options market?
 Show the strategy that would give the highest payoff given your expectation about the future exchange rate.
b)Graphically illustrate the loss and profit positions for the speculation in the options market.Label your graph clearly.

Accepted Answer

The answer of Given the following information:   If...

Question 18

Eurodollar interest rate futures contracts have all of the following characteristics except:

Accepted Answer

A) The futures contract is written on a hypothetical $1,000,000 180-day deposit of Eurodollars. 
B) No actual delivery of Eurodollars takes place. 
C) The contracts are made out many years into the future. 
D) The contracts are widely used. 
A) The futures contract is written on a hypothetical $1,000,000 180-day deposit of Eurodollars. 
B) No actual delivery of Eurodollars takes place. 
C) The contracts are made out many years into the future. 
D) The contracts are widely used.

Question 19

Determine the implied 3-month LIBOR yield for March 2010.

Accepted Answer

A) 6.38% 
B) 6.41% 
C) 9.36% 
D) need more information 
A) 6.38% 
B) 6.41% 
C) 9.36% 
D) need more information

Question 20

Comparing "forward" and "futures" exchange contracts,we can say that:

Accepted Answer

A) they are both "marked-to-market" daily 
B) their major difference is in the way the underlying asset is priced for future purchase or sale 
C) a futures contract is negotiated by open outcry between floor brokers or traders and is traded on organized exchanges, while forward contract is tailor-made by an international bank for its clients and is traded OTC 
D) b and c 
A) they are both "marked-to-market" daily 
B) their major difference is in the way the underlying asset is priced for future purchase or sale 
C) a futures contract is negotiated by open outcry between floor brokers or traders and is traded on organized exchanges, while forward contract is tailor-made by an international bank for its clients and is traded OTC 
D) b and c

In reference to the derivatives market,a "hedger"

Suppose the Canadian Wheat Pool wants to hedge a US dollar payable using futures contracts that trade on the Chicago Mercantile exchange.

The "open interest" shown in currency futures quotations is:

If you have a long position in one futures contract,the changes in the margin account from daily marking-to-market,will result in the balance of the margin account after the third day to be:

In the absence of transactions costs,for the same maturity and currency

What is the lowest possible 1-year forward $/£ exchange rate FROM THE LIST BELOW?

When the LIBOR yield drops the

In reference to the derivatives market,a "speculator"

Assume that the spot Euro is $1.2000 and the six-months forward rate is $1.2100.Determine the minimum price for which a six-month American put should sell for.The strike price is $1.1900 and the annualized six-month Eurodollar rate is 4%.

An "option" is:

Which of the following statements is true?

If you have a short position in one futures contract,the changes in the margin account from daily marking-to-market will result in the balance of the margin account after the third day to be:

The value of a European call will increase with all of the following except:

Eurodollar interest rate futures contracts have all of the following characteristics except:

Determine the implied 3-month LIBOR yield for March 2010.

Comparing "forward" and "futures" exchange contracts,we can say that:

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 9: Management of Economic Exposure

In reference to the derivatives market,a "hedger"

Suppose the Canadian Wheat Pool wants to hedge a US dollar payable using futures contracts that trade on the Chicago Mercantile exchange.

The "open interest" shown in currency futures quotations is:

If you have a long position in one futures contract,the changes in the margin account from daily marking-to-market,will result in the balance of the margin account after the third day to be:

In the absence of transactions costs,for the same maturity and currency

What is the lowest possible 1-year forward $/£ exchange rate FROM THE LIST BELOW?

When the LIBOR yield drops the

In reference to the derivatives market,a "speculator"

Assume that the spot Euro is $1.2000 and the six-months forward rate is $1.2100.Determine the minimum price for which a six-month American put should sell for.The strike price is $1.1900 and the annualized six-month Eurodollar rate is 4%.

An "option" is:

Which of the following statements is true?

If you have a short position in one futures contract,the changes in the margin account from daily marking-to-market will result in the balance of the margin account after the third day to be:

The value of a European call will increase with all of the following except:

Eurodollar interest rate futures contracts have all of the following characteristics except:

Determine the implied 3-month LIBOR yield for March 2010.

Comparing "forward" and "futures" exchange contracts,we can say that:

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters