Multiple Choice Questions
1. Which one of the following stock index futures has a multiplier of 250?
A) Rusll 2000
B) S&P 500 Index
C) Nikkei
D) DAX-30
E) NASDAQ 100
Answer: B Difficulty: Easy
Rationale: The multiplier is ud to calculate contract ttlements. See Table 23.1 on page 829.
2. You purchad one S&P 500 Index futures contract at a price of 950 and clod your
position when the index futures was 947, you incurred:
A) a loss of $1,500.
B) a gain of $1,500.
C) a loss of $750.
D) a gain of $750.
E) None of the above.
Answer: C Difficulty: Moderate
Rationale: (-$950 + $947) X 250 = - $750.
3. You took a short position in two S&P 500 futures contracts at a price of 910 and clod
the position when the index futures was 892, you incurred:
A) a gain of $9,000.
B) a loss of $9,000.
C) a loss of $18,000.
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D) a gain of $18,000.
E) None of the above.
Answer: A Difficulty: Easy
Rationale: ($910 - $892) X 250 X 2 = $9,000
4. If a stock index futures contract is overpriced, you would exploit this situation by:
A) lling both the stock index futures and the stocks in the index.
B) lling the stock index futures and simultaneously buying the stocks in the index.
C) buying both the stock index futures and the stocks in the index.
D) buying the stock index futures and lling the stocks in the index.
E) None of the above.
Answer: B Difficulty: Moderate
Rationale: If one perceives one ast to be overpriced relative to another ast, one lls the overpriced ast and buys the other one.
5. The "Triple Witching Hour" is a term ud to refer to the simultaneous expiration of:
A) S&P 100 stock index options and the Major Market Index futures and option
contracts.
B) S&P 500 futures, S&P index options, and options on individual stocks.ipad破解
C) S&P 500 futures, options on futures and options on dividend stocks.
D) S&P 100 stock index options, options of futures and options on individual stocks.
E) S&P 500 futures, DJIA futures and individual stock options.
Answer: B Difficulty: Moderate球后
Rationale: Program trading, which is a product of the triple witching hour, was thought to cau the 1987 market crash. Since that crash, a number of "circuit breakers" have been put in place. One of the circuit breakers is that expiring contracts on the S&P 500, S&P 100, and the NYSE now cea trading on Thursday afternoon rather than Friday.
The contracts are marked to market for the last time on Friday using the stock index value at market opening. Futures and options on the Major Market Index and the Value Line Index are ttled, as before, bad on Friday closing price.
6. Expiration-day volatility has been explained by
A) program trading to exploit arbitrage opportunities.
B) transactions costs.
C) lags in execution of arbitrage strategies.
D) A and B.
E) B and C.
Answer: A Difficulty: Difficult
Rationale: Arbitrageurs relying on the convergence strategy to exploit earlier
mispricings can cau waves of program lling that increa volatility.
7. Foreign Exchange Futures markets are __________ and the Foreign Exchange Forward
markets are __________.
A) informal; formal
B) formal; formal小甲虫
C) formal; informal
沦落是什么意思D) informal; informal
彩虹少年E) organized; unorganized
Answer: C Difficulty: Easy
Rationale: The forward market in foreign exchange is a network of banks and brokers allowing customers to enter forward contracts to purcha or ll currency in the future at a currently agreed upon rate of exchange. The currency futures markets are formal markets established by the Chicago Mercantile Exchange where contracts are
standardized as to size and daily marking to market is obrved. A clearinghou is also involved.
8. Suppo that the risk-free rates in the United States and in the United Kingdom are 4%
and 6%, respectively. The spot exchange rate between the dollar and the pound is $1.60/BP. What should the futures price of the pound for a one-year contract be to prevent arbitrage opportunities, ignoring transactions costs.
A) $1.60/BP
B) $1.70/BP
C) $1.66/Bp
D) $1.63/BP
E) $1.57/BP
Answer: E Difficulty: Moderate
Rationale: $1.60(1.04/1.06) = $1.57/BP.
9. Let R US be the annual risk free rate in the United States, R UK be the risk free rate in the
United Kingdom, F be the futures price of $/BP for a 1-year contract, and E the spot exchange rate of $/BP. Which one of the following is true?
A) if R US > R UK, then E > F
B) if R US < R UK, then E < F
C) if R US > R UK, then E < F
D) if R US < R UK, then F = E
E) There is no consistent relationship that can be predicted.
Answer: C Difficulty: Difficult
Rationale: if RUS > RUK, then (1 + RUS)/(1 + RUK) > 1 and E < F.
U the following to answer questions 10-13:
Consider the following:
Risk-free rate in the United States 0.04/year高一语文试卷
Risk-free rate in Australia 0.03/year
Spot exchange rate 1.67 A$/$
10. What should be the proper futures price for a 1-year contract?
A) 1.703 A$/$
B) 1.654 A$/$
C) 1.638 A$/$
D) 1.778 A$/$
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E) 1.686 A$/$
Answer: B Difficulty: Moderate
Rationale: 1.03/1.04(1.67 A$/$) = 1.654 A$/$.
11. If the futures market price is 1.63 A$/$, how could you arbitrage?
A) Borrow Australian Dollars in Australia, convert them to dollars, lend the proceeds
in the United States and enter futures positions to purcha Australian Dollars at the
current futures price.
B) Borrow U. S dollars in the United States, convert them to Australian Dollars, lend
the proceeds in Australia and enter futures positions to ll Australian Dollars at the
current futures price.
C) Borrow U. S. dollars in the United States and invest them in the U. S. and enter
futures positions to purcha Australian Dollars at the current futures price.
D) Borrow Australian Dollars in Australia and invest them there, then convert back to
U. S. dollars at the spot price.
E) There is no arbitrage opportunity.
Answer: B Difficulty: Difficult
Rationale: E0(1 + r US) - F O(1 + r A); u the U. S. $ values for the currency: 0.5988(1.04) - 0.6135(1.03) = -0.009153; when relationship is negative, action b will result in
arbitrage profits.
12. If the market futures price is 1.69 A$/$, how could you arbitrage?
A) Borrow Australian Dollars in Australia, convert them to dollars, lend the proceeds
in the United States and enter futures positions to purcha Australian Dollars at the current futures price.
B) Borrow U. S. dollars in the United States, convert them to Australian Dollars, lend
the proceeds in Australia and enter futures positions to ll Australian Dollars at the current futures price.
C) Borrow U. S. dollars in the United States and invest them in the U. S. and enter
futures positions to purcha Australian Dollars at the current futures price.
D) Borrow Australian Dollars in Australia and invest them there, then convert back to
U. S. dollars at the spot price.
E) There is no arbitrage opportunity.
Answer: A Difficulty: Difficult
Rationale: 0.5988(1.04) - 0.5917(1.03) = 0.013301; when this relationship is positive;
action a will result in arbitrage profits.
13. Assume the current market futures price is 1.66 A$/$. You borrow 167,000 A$ and
convert the proceeds to U. S. dollars and invest them in the U. S at the risk-free rate.
You simultaneously enter a contract to purcha 170,340 A$ at the current futures prices (maturity of 1 year). What would be your profit (loss)?
A) Profit of 630 A$
B) Loss of 2300 A$
C) Profit of 2300 A$
D) Loss of 630 A$
E) None of the above
Answer: A Difficulty: Difficult
Rationale: [A$ 167,000 / 1.67 x 1.04 x 1.66] - (A$ 167,000 x 1.03) = A$ 630.
14. Which of the following are examples of interest rate futures contracts?
A) corporate bonds.
B) Treasury bonds.
C) Eurodollars.
D) B and C
E) S and B
Answer: C Difficulty: Easy
Rationale: Interest rate futures are traded on Treasury bonds and Eurodollars. Examples that u the contracts to hedge are given in the textbook.
