单选题 It is April 15, and a trader is entered into a short position in two soybean meal futures contracts. The contracts expire on August 15, and call for the delivery of 100 tons of soybean meal each. Further, because this is a futures position, it requires the posting of a $3000 initial margin and a $1500 maintenance margin per contract. For simplicity, however, assume that the account is marked to market on a monthly basis. Assume the following represent the contract delivery prices (in dollars per ton) that prevail on each settlement date:

April 15 (initiation)

May 15

June 15

July 15

August 15 (delivery)

173.00

179.75

189.00

182.50

174.25

单选题 What is the equity value of the margin account on the May 15 settlement date, including any additional equity that is required to meet a margin call?

A. $4650.
B. $2300.
C. $2700.

【正确答案】 A

【答案解析】Total margin = 2 × 3000 = $6000. Total price change = 179.75 - 173.00 = $6.75 per ton. $6.75 per ton × 200 tons = $1350. Since this is a short position, the margin account will decrease by $1350. $6000- $1350= $4650.

单选题 Based on the May 15 settlement date, which of the following is TRUE?

A. Since the equity value fell below the maintenance level, a variation margin is called.
B. Due to the fact that the equity value falls below the initial margin, a variation margin is called to restore the equity value of the account to it's initial level.
C. The equity value falls below the initial margin.

【正确答案】 C

【答案解析】The equity value falls below the initial margin, but since the equity value does not fell below the maintenance level, a variation margin is not called

单选题 Which is least likely to be true? Forward contracts:

A. are unique contracts.
B. are private contracts.
C. require no up front cash and are default risk free.

【正确答案】 C

【答案解析】Forwards have default risk. The seller may not deliver, and the buyer may not accept delivery.

单选题 Tommy Stamlano owns stock worth $80 per share. Stamlano buys a put option with a strike price of $70 for $1.50. At expiration of the put option, the stock price is $65 per share. The profit or loss from Stamlano's portfolio insurance strategy is a:

A. loss of $11.50.
B. loss of $1.50.
C. gain of $16.50.

【正确答案】 A

【答案解析】The put option is in-the-money at expiration ( Max (0, X - S) ) and is worth $5. Stamlano lost $15 on the stock ( $80- $65) and is also out the premium on the option, $1.50. Therefore, Stamlano lost a total of $11.50 ( - $15 - $1.50 + $5).

单选题 Which of the following statements regarding equity forward contracts is FALSE?

A. Equity forwards may be settled in cash.
B. Dividends are never included in index forwards.
C. A short position in equity forward could not hedge the risk of a purchase of that equity in the future.

【正确答案】 B

【答案解析】Index forward contracts may be written total return contracts, which include dividends. Contracts may be written to settle in cash, be deliverable, or may be on custom portfolios. A long position is used to reduce the price risk of all expected future purchase.

单选题 All of the following statements regarding interest-rate options are true EXCEPT:

A. they are based on a fixed income security and can hedge interest rate risk.
B. they are based on a specific interest rate rather than a bond.
C. call option values move in the same direction as interest rates.

【正确答案】 A

【答案解析】Treasury bond or bill options are options on fixed income securities. Interest rate options are based on a specific reference rate and interest rate calls have positive payoffs when the reference rate is above the rate specified in the contract.

单选题 There is a call option on a stock that is currently selling for $25 and it is in-the-money by $8. Find the call option's strike price:

A. $17.
B. $25.
C. $33.

【正确答案】 A

【答案解析】When the stock's price(S) -the strike price (X) is positive, a call option is in-the-money. 25-X=8 so X=17.

单选题 Which type of futures contract does NOT allow for the underlying goods to be delivered?

A. Interest rate.
B. Index.
C. Foreign currency.

【正确答案】 B

【答案解析】The nature of an index future realistically prohibits settlement in the underlying commodity. For example, the Standard and Poor's 500 stock index would require settlement in 500 different common stocks, in the exact proportion of the total value as exists in the index at expiration of the future. Agriculture, interest rate, and currency futures all involve deliverable commodities.

单选题 Suppose the price of a share of Stock A is $100. A European call option that matures one month from now has a premium of $8, and an exercise price of $100. Ignoring commissions and the time value of money, the holder of the call option will earn a profit if the price of the share one month from now:

A. increases to $106.
B. decreases to $94.
C. increases to $110.

【正确答案】 C

【答案解析】The breakeven point is the strike price plus the premium, or $100 + $8 = $108. Any price greater than this would result in a profit, and the only choice that exceeds this amount is $110.

单选题 In negotiating a swap, the two counterparties agree to exchange:

A. a series of options.
B. a series of cash flows.
C. a series of forward contracts.

【正确答案】 B

【答案解析】

单选题 A Swiss firm can borrow in Switzerland at 10 percent and in the U. S. at 8.5 percent. A U. S. firm can borrow in Switzerland at 10.5 percent and in the U. S. at 8.5 percent. Which firm has a comparative advantage in which currency? The:

A. Swiss firm has a comparative advantage borrowing in the U. S.
B. Swiss firm has a comparative advantage borrowing in Switzerland.
C. U.S. firm has a comparative advantage in borrowing in the U. S.

【正确答案】 B

【答案解析】The interest rates are equal for borrowing in the U. S. , but the Swiss firm can borrow in Switzerland at a lower rate, thus giving the Swiss firm the comparative advantage in Switzerland.

单选题 Given the following data regarding Printer, Inc. 's call options, which of the following statements is FALSE?

Stock Price

Expiration

Strike

Option Prem. (Last)

June

0.50

A. The June $55.00 call is an in-the-money option.
B. The June $50. O0 call is an at-the-money option.
C. The intrinsic value of the June $45.00 call is $5.00.

【正确答案】 A

【答案解析】The June $55.00 call option is out-of-the money. It gives the purchaser the right to buy Printer, Inc: for $55.00 when they would only have to pay $50.00 in the market.

单选题 Assume the following information relating to a fixed-for-fixed currency swap between Party C and D who hold German marks and U. S. dollars respectively. The spot exchange rate between German marks and U. S. dollars is 2.5 marks per dollar. The U. S. interest rate is 10% and the German interest rate is 8%. Party C holds 25 million marks and wants dollars. In return for the marks, Party D would pay:

A. DM 25 million to Party C at the initiation of the swap.
B. $10000000 to Party C at the initiation of the swap.
C. $10000000 to Party C at the initiation of the swap.

【正确答案】 C

【答案解析】In return for the marks, Party D would pay $10000000 to Party C at the initiation of the swap. DM 25000000/2.5 = $10000000.

单选题 An investor pays $2 for a call option with an exercise price of $95, when the underlying stock price is $95. If the stock price is now $96, the intrinsic value of the call option would be :

A. -$1
B. $0
C. $1

【正确答案】 C

【答案解析】The intrinsic value is $1 ; a stock priced at $96 can be purchased for $95.

单选题 Which is the only type of commodity where trading in forward contracts is larger than trading with future contracts?

A. Agricultural.
B. Foreign currency.
C. Interest rate.

【正确答案】 B

【答案解析】Trading in foreign currency forwards is far larger than the trading in futures. For example, with international trade, businesses can hedge against adverse currency fluctuations. But each business arrangement is unique, and most require the flexibility of a forward, whose terms are not standardized, that meets their special needs.

单选题 Two parties enter a three-year, plain-vanilla interest-rate swap agreement to exchange the LIBOR rate for a 10 percent fixed rate on $10 million. LIBOR is 11 percent now, 12 percent at the end of the first year, and 9 percent at the end of the second year. If payments are in arrears, which of the following characterizes the net cash flow, to be received by the fixed-rate payer?

A. $100000 at the end of year 2.
B. $100000 at the end of year 3.
C. $200000 at the end of year 2.

【正确答案】 C

【答案解析】Year Fix pay Vat. pay Net Dollars 1 10% 11% 1% to fixed + $100.000 2 10% 12% 2% to fixed + $200.000 3 10% 9% 1% to variable - $100.000

单选题 When the underlying stock price is $95, an investor pays $2 for a call option with an exercise price of $95. if the stock price moves to $96, the intrinsic value of the call option would be :

A. -$1.
B. $0.
C. $1.

【正确答案】 C

【答案解析】The intrinsic value is $1 ; a stock priced at $96 can be purchased for $95.