DERIVATIVES MARKETS
SAMPLE
FOR
QUESTIONS
The questions have been written to assist the student in studying for the Exam FM/2. They are not intended to cover the entire breadth of the syllabus for Financial Economics.
1. Which statement about zero-cost purchad collars is FALSE?
A. A zero-width, zero-cost collar can be created by tting both the put and call strike
prices at the forward price.
B. There are an infinite number of zero-cost collars.
C. The put option can be at-the-money.
D. The call option can be at-the-money.
E. The strike price on the put option must be at or below the forward price.
2. You are given the following information:
•The current price to buy one share of XYZ stock is 500.
•The stock does not pay dividends.
•The risk-free interest rate, compounded continuously, is 6%.
• A European call option on one share of XYZ stock with a strike price of K that expires in one year costs 66.59.
• A European put option on one share of XYZ stock with a strike price of K that expires in one year costs 18.64.
Using put-call parity, determine the strike price, K.
A. 449
B. 452
蒸鲈鱼的做法
C. 480
D. 559
E. 582
3. Happy Jalapenos, LLC has an exclusive contract to supply jalapeno peppers to the
organizers of the annual jalapeno eating contest. The contract states that the contest organizers will take delivery of 10,000 jalapenos in one year at the market price. It will cost Happy Jalapenos 1,000 to provide 10,000 jalapenos and today’s market price is
0.12 for one jalapeno. The continuously compounded risk-free interest rate is 6%.
Happy Jalapenos has decided to hedge as follows (both options are one-year,
European):
Buy 10,000 0.12-strike put options for 84.30 and ll 10,000 0.14-stike call options for
74.80.
青岛的特产
Happy Jalapenos believes the market price in one year will be somewhere between 0.10 and 0.15 per pepper. Which interval reprents the range of possible profit one year from now for Happy Jalapenos?
A. –200 to 100
感恩节的故事B. –110 to 190
C. –100 to 200
D. 190 to 390
E. 200 to 400
4. Zero-coupon risk-free bonds are available with the following maturities and yield rates
(effective, annual):
Maturity (years) Yield
1 0.06
2 0.065
3 0.07
You need to buy corn for producing ethanol. You want to purcha 10,000 bushels one year from now, 15,000 bushels two years from now, and 20,000 bushels three years from now. The current forward prices, per bushel, are 3.89, 4.11, and 4.16 for one, two, and three years respectively.
You want to enter into a commodity swap to lock in the prices. Which of the
following quences of payments at times one, two, and three will NOT be acceptable to you and to the corn supplier?
A. 38,900, 61,650, 83,200
B. 39,083, 61,650, 82,039
C. 40,777, 61,166, 81,554
D. 41,892, 62,340, 78,997
E. 60,184, 60,184, 60,184
5. You are given the following information:
•One share of the PS index currently lls for 1,000.
•The PS index does not pay dividends.
•The effective annual risk-free interest rate is 5%.
You want to lock in the ability to buy this index in one year for a price of 1,025. You can do this by buying or lling European put and call options with a strike price of 1,025. Which of the following will achieve your objective and also gives the cost today of establishing this position.
A. Buy the put and ll the call, receive 23.81
B. Buy the put and ll the call, spend 23.81
C. Buy the put and ll the call, no cost
D. Buy the call and ll the put, receive 23.81
E. Buy the call and ll the put, spend 23.81
长明灯打一字6. The current price of one share of XYZ stock is 100. The forward price for delivery of
one share of XYZ stock in one year is 105. Which of the following statements about the expected price of one share of XYZ stock in one year is TRUE?
A. It will be less than 100
B. It will be equal to 100
C. It will be strictly between 100 and 105
D. It will be equal to 105
E. It will be greater than 105.
7. A non-dividend paying stock currently lls for 100. One year from now the stock lls
for 110. The risk-free rate, compounded continuously, is 6%. The stock is purchad in the following manner:
•You pay 100 today
•You take posssion of the curity in one year
Which of the following describes this arrangement?
A. Outright purcha
B. Fully leveraged purcha
C. Prepaid forward contract
D. Forward contract
E. This arrangement is not possible due to arbitrage opportunities
8. You believe that the volatility of a stock is higher than indicated by market prices for
无线网怎么设置options on that stock. You want to speculate on that belief by buying or lling at-the-money options. What should you do?
宿务岛A. Buy a strangle
B. Buy a straddle
C. Sell a straddle
D. Buy a butterfly spread
E. Sell a butterfly spread
9. You are given the following information:
• The current price to buy one share of ABC stock is 100
• The stock does not pay dividends
• The risk-free rate, compounded continuously, is 5%
• European options on one share of ABC stock expiring in one year have the
following prices:
Strike Price Call option price Put option price
90 14.63 0.24 100 6.80 1.93 110 2.17
6.81
A butterfly spread on this stock has the following profit diagram.
Which of the following will NOT produce this profit diagram?
大黄功效A. Buy a 90 put, buy a 110 put, ll two 100 puts
B. Buy a 90 call, buy a 110 call, ll two 100 calls
C. Buy a 90 put, ll a 100 put, ll a 100 call, buy a 110 call
D. Buy one share of the stock, buy a 90 call, buy a 110 put, ll two 100 puts
大班户外活动E. Buy one share of the stock, buy a 90 put, buy a 110 call, ll two 100 calls.
