Revision Quiz 4q
This document was uploaded by user and they confirmed that they have the permission to share it. If you are author or own the copyright of this book, please report to us by using this DMCA report form. Report DMCA
Overview
Download & View Revision Quiz 4q as PDF for free.
More details
- Words: 420
- Pages: 3
FINANCIAL RISK MANAGEMENT
1.
Which of the following statements is false? A. B. C. D.
2.
A forward contract is a negotiable instrument. Forward contracts involve only one cashflow. Forward contracts are subject to default risk. A forward contract is an exchange-tradeable contract.
Which of the following statements is false? A.
Forward contracts are generally more liquid than futures contracts. B. Futures contracts are more likely to expose a holder to basis risk than forward contracts. C. Futures contracts are generally more attractive to speculators than are forward contracts. D. The spreads on a forward contract are likely to be wider than for a comparable futures contract. 3.
An investor is long a forward contract to purchase a non-dividendpaying stock in three months. The current stock price is $50 and the three-month risk-free rate is 6% pa. Calculate the arbitragefree price of the forward contract. A. B. C. D.
4.
An investor is long a forward contract to purchase a couponbearing bond in nine months. The current price of the bond is $950 and it will pay a semi-annual coupon in four months at a rate of 8% pa on a face value of $1,000, and the four-month and ninemonth risk-free rates are respectively 3% and 4% pa. Calculate the arbitrage-free price of the forward contract. A. B. C. D.
5.
$937.71 $978.93 $938.12 $947.55
An investor is long a six-month forward contract on an asset that is expected to provide an income equal to 3% pa of the asset price during the six-month period. The current price of the asset is $25 and the six-month risk-free rate is 10% pa. Calculate the arbitrage-free price of the forward contract. A. B. C. D.
6.
$53.09 $50.76 $49.26 $50.75
$26.28 $24.50 $26.68 $25.89
An investor is long a forward contract to purchase a couponbearing bond in nine months. The current price of the bond is $1,000 and it will pay a $40 coupon in four months and the fourmonth and nine-month risk-free rates are respectively 3% and 4% pa. What would be a profitable arbitrage if the price of the forward contract were $910? A. Buy the coupon-bond and go sell the forward contract. B. Short the coupon-bond and go long the forward contract. C. Go long the coupon-bond and short the forward contract.
ONLINE QUIZ 4
FINANCIAL RISK MANAGEMENT
ONLINE QUIZ 4
FINANCIAL RISK MANAGEMENT CORRECT ANSWERS 1.
D
2.
A
3.
B
4.
C
5.
D
6.
B
7.
C
8.
A
9.
D
10.
C
ONLINE QUIZ 4
1.
Which of the following statements is false? A. B. C. D.
2.
A forward contract is a negotiable instrument. Forward contracts involve only one cashflow. Forward contracts are subject to default risk. A forward contract is an exchange-tradeable contract.
Which of the following statements is false? A.
Forward contracts are generally more liquid than futures contracts. B. Futures contracts are more likely to expose a holder to basis risk than forward contracts. C. Futures contracts are generally more attractive to speculators than are forward contracts. D. The spreads on a forward contract are likely to be wider than for a comparable futures contract. 3.
An investor is long a forward contract to purchase a non-dividendpaying stock in three months. The current stock price is $50 and the three-month risk-free rate is 6% pa. Calculate the arbitragefree price of the forward contract. A. B. C. D.
4.
An investor is long a forward contract to purchase a couponbearing bond in nine months. The current price of the bond is $950 and it will pay a semi-annual coupon in four months at a rate of 8% pa on a face value of $1,000, and the four-month and ninemonth risk-free rates are respectively 3% and 4% pa. Calculate the arbitrage-free price of the forward contract. A. B. C. D.
5.
$937.71 $978.93 $938.12 $947.55
An investor is long a six-month forward contract on an asset that is expected to provide an income equal to 3% pa of the asset price during the six-month period. The current price of the asset is $25 and the six-month risk-free rate is 10% pa. Calculate the arbitrage-free price of the forward contract. A. B. C. D.
6.
$53.09 $50.76 $49.26 $50.75
$26.28 $24.50 $26.68 $25.89
An investor is long a forward contract to purchase a couponbearing bond in nine months. The current price of the bond is $1,000 and it will pay a $40 coupon in four months and the fourmonth and nine-month risk-free rates are respectively 3% and 4% pa. What would be a profitable arbitrage if the price of the forward contract were $910? A. Buy the coupon-bond and go sell the forward contract. B. Short the coupon-bond and go long the forward contract. C. Go long the coupon-bond and short the forward contract.
ONLINE QUIZ 4
FINANCIAL RISK MANAGEMENT
ONLINE QUIZ 4
FINANCIAL RISK MANAGEMENT CORRECT ANSWERS 1.
D
2.
A
3.
B
4.
C
5.
D
6.
B
7.
C
8.
A
9.
D
10.
C
ONLINE QUIZ 4
