Topic 4 Flashcards
Yesterday, you entered into a futures contract to buy €62,500 at $1.50 per €. Suppose the futures price closes today at $1.46. How much have you made/lost?
A. $1250 B. $2500 C. -$2500 D. -€2500 E. None of the above
C. -$2500
Yesterday, you entered into a futures contract to sell €62,500 at $1.50 per €. Suppose the futures price closes today at $1.48. How much have you made/lost?
A. $1250 B. $2500 C. -$2,500 D. $625 E. None of the above
A. $1250
The current spot exchange rate is $1.55 = €1.00. Consider an American call option on €62,500 with a strike price of $1.50 = €1.00. Immediate exercise of this option will generate a profit of
A. $6,125
B. -$6,125
C. negative profit, so exercise would not occur
D. $3,125
D. $3,125
The current spot exchange rate is $1.55 = €1.00. Consider an American put option on €62,500 with a strike price of $1.50 = €1.00. Immediate exercise of this option will generate a profit of
A. $6,125
B. -$6,125
C. negative profit, so exercise would not occur
D. $3,125
C. negative profit, so exercise would not occur
The current spot exchange rate is $1.55 = €1.00. Consider an American put option on €62,500 with a strike price of $1.60 = €1.00. Immediate exercise of this option will generate a profit of
A. $6,125
B. -$6,125
C. negative profit, so exercise would not occur
D. $3,125
D. $3,125
Sep 1.4200 call – premium = 4.41 ($.0441)
Gives the right to buy euros at $1.42
If spot = $1.4237 and the option expires today, what are your profits?
A. Negative, don’t exercise
B. $0.0037/euro
C. -$0.0404/euro
D. -$0.0037/euro
C. -$0.0404/euro
Jun 1.4300 put – premium = 2.01 ($.0201)
If spot = $1.4237 and the option expires today, what are your profits?
A. Negative, don’t exercise
B. $0.0201/euro
C. -$0.0201/euro
D. -$0.0138/euro
D. -$0.0138/euro
Jun 1.4300 put – premium = 1.01 ($.0101)If spot = $1.41 and the option expires today, what are your profits?
A. Negative, don’t exercise
B. $0.0099/euro
C. $0.0101/euro
D. -$0.0138/euro
B. $0.0099/euro
Spot = $1.3648/EUR. The premium for a $1.35 call is $.02/EUR.What is the intrinsic value?What is the time value?
A. $0.0052; $0.0148
B. $0.0148; $0.0052
C. $0; $.02
D. $0.0148; $.02
B. $0.0148; $0.0052
A swap bank makes the following quotes for 5-year swaps and AAA-rated firms:
Bid Ask
USD 5 - 5.2%
Euro 7 - 7.2%
A. The bank stands ready to pay $5.2% against receiving dollar LIBOR
B. The bank stands ready to receive €7% against paying dollar LIBOR
C. The bank stands ready to pay €7% against receiving dollar LIBOR
D. None of the above
C. The bank stands ready to pay €7% against receiving dollar LIBOR
The swap bank quotes a three-year swap as 5.1—5.2 (against USD LIBOR).
A. The bank will take 5.1% against paying LIBOR
B. The bank will take LIBOR against paying 5.1%
C. The bank will take LIBOR against paying 5.2%
D. The bank will take 5.2% against paying LIBOR
E. Both B and D
E. Both B and D
Two companies have the following borrowing costs, what is the QSD?
Fixed-Rate Floating-Rate
X: 10% - LIBOR
Y: 12% - LIBOR+1.5%
A. 20 bps B. 30 bps C. 40 bps D. 50 bps E. None of the above
D. 50 bps
