单项选择题

Which of the following statements most accurately describes the difference between LIBOR and Euribor

A．LIBOR is a lending rate, while Euribor is a borrowing rate.
B．LIBOR is a representative borrowing rate on U. S. dollars, while Euribor is a representative borrowing rate on euros.
C．LIBOR is a global risk-free rate, while Euribor is a European risk-free rate.

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单项选择题

Which of the following is an example of an arbitrage opportunity

A．A portfolio of two securities that will produce a certain return that is greater than the riskfree rate of interest.
B．A stock with the same price as another has a higher rate of return.
C．A stock with the same price as another has a higher expected rate of return.

单项选择题

Which of the following statements about the futures market is most accurate

A．Speculators trade to reduce some preexisting risk exposure.
B．If a trader"s account falls below the maintenance margin level they have three days to bring it back up to the maintenance margin level.
C．Open interest is the number of futures contracts for which delivery is currently obligated.

单项选择题

Which of the following statements is most accurate

A．Forward contracts require that both parties to the transaction have a high degree of creditworthiness.
B．Forward contracts are marked to market daily.
C．Futures contracts have more default risk than forward contracts.

单项选择题

An option sold for $10 is currently in-the-money $5. If the underlying is priced at $80, which of the following best describes that option

A．Put option with an exercise price of $85.
B．Put option with an exercise price of $70.
C．Call option with an exercise price of $75.

单项选择题

The main risk faced by an individual who enters into a forward contract to buy the S&P 500 Index is that

A．the market may rise.
B．the market may fall.
C．market volatility may rise.

单项选择题

A U. S. bank enters into a plain vanilla currency swap with a notional principal of US $100m (￡ 67m). At each settlement date, the U.S. bank pays a fixed rate of 8 percent on the pounds received, and an English bank pays a variable rate equal to London interbank offered rate (LIBOR) on the U. S. dollars received. Given the following information, what payment is made to whom at the end of year 2

The U. S. bank pays:

A．US $5.5m and the English bank pays ￡ 5.36m.
B．US $6m and the English bank pays ￡ 5.36m.
C．￡ 5.36m and the English bank pays US $5.5m.

单项选择题

To account for positive cash flows from the underlying asset, we need to adjust the put-call parity formula by:

A．adding the future value of the cash flows to S.
B．adding the future value of the cash flows to X.
C．subtracting the present value of the cash flows from S.

单项选择题

Which of the following statements most accurately describes the difference between LIBOR and Euribor

A．LIBOR is a lending rate, while Euribor is a borrowing rate.
B．LIBOR is a representative borrowing rate on U. S. dollars, while Euribor is a representative borrowing rate on euros.
C．LIBOR is a global risk-free rate, while Euribor is a European risk-free rate.

单项选择题

Which of the following statements regarding a futures trade of a deliverable contract is FALSE

A．The long is obligated to purchase the asset.
B．The short is obligated to deliver the asset.
C．Equilibrium futures price is known only at the end of the trading day.

单项选择题

Which statement about equity forward contracts is least likely accurate

A．Investors can use equity forward contracts to speculate on stock-price increases.
B．Dividend payments are usually included in equity forward contracts.
C．Equity forward contracts may require asset delivery or cash settlement.

单项选择题

Which of the following statements about put and call options is FALSE

A．The price of the option is less volatile than the price of the underlying stock.
B．Option prices are generally higher the longer the time till the option expires.
C．For put options, the higher the strike price relative to the stock"s underlying price, the more the put is worth.

单项选择题

Which of the following statements is NOT an advantage of swaps Swaps:

A．give the traders privacy.
B．have little or no regulation.
C．minimize default risk.

单项选择题

Which of the following statements about swaps is least accurate

A．Swaps typically have zero value at initiation.
B．Swaps can have significant default risk.
C．Parties to swap contracts are often individual speculators.

单项选择题

Which of the following combinations of options and underlying investments have similarly shaped profit/loss diagrams

A．Long call option/short put option and long stock position.
B．Covered call and short stock/long call.
C．Short put option/long call option and protective put.

单项选择题

Given the covered call option diagram below and the following information, what are the dollar values for points X and Y The market price of the stock is $70, the strike price of the call is $80, and the call premium is $5.

A．$75, and point Y represents a dollar value of $15.
B．$70, and point Y represents a dollar value of $15.
C．$80, and point Y represents a dollar value of $15.

单项选择题

An investor who bought a floating-rate security and wishes to establish a minimum periodic cash flow on his investment could:

A．buy an interest-rate floor.
B．sell an interest-rate cap.
C．buy an interest-rate cap.

单项选择题

An option"s intrinsic value is equal to the amount the option is:

A．out of the money, and the time value is the market value minus the intrinsic value.
B．in the money, and the time value is the intrinsic value minus the market value.
C．in the money, and the time value is the market value minus the intrinsic value.

单项选择题

If 60-day London Interbank Offered Rate (LIBOR) is 6 percent, the interest on a 60-day LIBOR-based Eurodollar deposit of $990000 is:

A．$10000.
B．$9900.
C．$60000.

单项选择题

Prior to expiration, the maximum value of an Americana call option and an American put option, respectively, is closest to the:
American put option American call option
①A. Exercise price Exercise price
②B. Exercise price Underlying price
③C. Underlying price Exercise price

A．①
B．②
C．③

单项选择题

Which of the following statements regarding the mark to market of a futures account is FALSE Marking to market of a futures account:

A．may result in a margin balance above the initial margin amount and may be done more often than daily.
B．is only done when the settlement price is below the maintenance price.
C．effectively adjusts the price of the future to the new equilibrium level.

单项选择题

Some forward contracts are termed cash settlement contracts. This means:

A．either the long or the short in the forward contract will make a cash payment at contract expiration and the asset is not delivered.
B．at settlement, the long purchases the asset from the short for cash.
C．at contract expiration, the long can buy the asset from the short or pay the difference between the market price of the asset and the contract price.

单项选择题

Option investor D sells (writes, takes a SHORT position in) one of the following call options:
Type of option: call option
Underlying asset: 100 shares of Disney stock
Exercise price: $40 per share
Premium : $2.25 per share
Expiration date : January
The current market price of Disney stock is $39.02 per share. Investor D already owns 500 shares of Disney stock. Which of the following describes the amount of initial margin required for this transaction

A．Since the call option is "in the money" investor D is not required to deposit initial margin.
B．Since investor D owns at least 100 shares of Disney stock, he must deposit initial margin in the amount of 100% of the option premium.
C．Since investor D owns at least 100 shares of Disney stock, no additional margin is required.

单项选择题

A financial instrument that has payoffs based on the price of an underlying physical or financial asset is a(n) :

A．option.
B．future.
C．derivative security.

单项选择题

A trader is long four July gold futures contracts, each with a contract size of 300 oz. If the price of July gold increases from $380.20 to $381.00 per ounce the change in the margin balance will be :

A．$960.
B．- $960.
C．$240.

单项选择题

An investor purchases a stock for $40 a share and simultaneously sells a call option on the stock with an exercise price of $42 for a premium of $3/share. Ignoring dividends and transactions cost, what is the maximum profit that the writer of this covered call can earn if the position is held to expiration

A．$81.
B．$6.
C．$5.

单项选择题

Prior to expiration, an American put option on a stock:

A．is bounded by S-X/(1 +RFR)T
B．will sell for its intrinsic value.
C．will never sell for less than its intrinsic value.

单项选择题

A trader buys (takes a long position in) a T-bill futures contract ( $1 million face value) at 98.14 and closes it out at a price of 98.27. On this contract the trader has :

A．lost $325.
B．gained $325.
C．lost $1300.

单项选择题

Typically, forward commitments are made with respect to all the following EXCEPT:

A．inflation.
B．bonds.
C．equities.

单项选择题

ABEX Corporation common stock is selling for $50.00 per share. Both an American call option and a European call option are available on ABEX common, and each have identical strike prices and expiration dates. Which of the following statements concerning these two options is TRUE

A．Because the American and European options have identical terms and are written against the same common stock, they will have identical option premiums.
B．The greater flexibility allowed in exercising the American option will normally result in a higher market value relative to an otherwise identical European option.
C．The American option will have a higher option premium, because the American security markets are larger than the European markets.

单项选择题

A short position in a forward rate agreement is equivalent to:

A．writing an interest rate put and buying an interest rate call.
B．buying an interest rate put and an interest rate call.
C．writing an interest rate call and buying an interest rate put.

单项选择题

An investor bought a 15 call for $14 on a stock trading at $20. If the stock is trading at $24 at option expiration, what is the profit and the value of the call at option expiration
Profit Value of the Call
①A. - $5 $5
②B. $4 - $5
③C. - $5 $9

A．①
B．②
C．③

单项选择题

The daily process of adjusting the margin in a futures account is called:

A．initial margin.
B．variation margin.
C．marking to market.

单项选择题

Concerning efficient financial( including derivative) markets, the most appropriate description is that

A．it is often possible to earn abnormal returns.
B．the law of one price holds only in the academic literature.
C．arbitrage opportunities rarely exist and are quickly eliminated.

单项选择题

Consider a commercial bank that is about to make a large variable-rate loan. Which of the following would be an appropriate position for the bank to hedge its risk with this loan Pay:

A．variable to a currency swap counterparty and receive fixed.
B．variable to an interest rate swap counterparty and receive fixed.
C．fixed to an interest rate swap counterparty and receive variable.

单项选择题

The graph is a depiction of a call option with an exercise price of $100.The graph shows that the:

A．the value of the call is $100.
B．the value of the call is unknown.
C．the value of the call is unlimited, in principle.

单项选择题

Which of the following statements regarding a forward commitment is FALSE A forward commitment :

A．is a contractual promise.
B．involves an action in the future.
C．is not legally binding and can involve a stock index.

单项选择题

An investor can exit a forward position prior to contract expiration by all of the following methods EXCEPT:

A．entering into an offsetting contract with the original counterparty or a second (different) counterparty.
B．exercising the early delivery option.
C．making a cash payment or accepting a cash payment by agreement with the original counterparty.

单项选择题

Which of the following relationships between arbitrage and efficient markets is least accurate

A．The concept of rationally priced financial instruments preventing arbitrage opportunities is the basis behind the no-arbitrage principle.
B．Momentary deviations from market efficiency can create an arbitrage opportunity.
C．Market efficiency refers to the low cost of trading derivatives because of the lower expense to traders.

单项选择题

A 60-day $10 million forward rate agreement (FRA) on 90-day London Interbank Offered Rate (LIBOR) (a 2 × 5 FRA) is priced at 4 percent. If 90-day LIBOR at the expiration date is 4.1 percent, the long:

A．receives $2500.00.
B．receives $2474.63.
C．pays $2500.00.

单项选择题

The graph is a depiction of a call option with an exercise price of $100.If the stock price were $500, at expiration, the call would be worth :

A．$0.
B．$100.
C．$400.

单项选择题

Delbert Gossert owns stock worth $32 per share. Gossert buys a put option with a strike price of $32 for $2.50. At expiration, the stock is valued at $32 per share. The profit or loss from Gossert"s portfolio insurance strategy is a:

A．loss of $2.50.
B．$0, no gain or loss.
C．gain of $2.50.

单项选择题

Buying an interest-rate cap and selling an interest-rate floor is equivalent to:

A．buying a series of interest-rate calls and selling a series of interest-rate puts.
B．buying a series of interest-rate puts and selling a series of interest rate calls.
C．buying a series of interest-rate puts and calls.

单项选择题

An options investor purchases one stock put option on General Motor"s stock. The put has the following characteristics :
Type of option: put option
Underlying asset: 100 shares of General Motor"s stock
Exercise price : $75 per share
Premium: $1.81 per share
Expiration date : November
By taking a LONG position in this put option, the investor has:

A．purchased the right to decide whether to sell 100 shares of General Motor"s stock and receive $181 during the specified time period (the expiration date in November)
B．purchased the right to decide whether to purchase 100 shares Of General Motor"s stock and receive $181 during the specified time period (the expiration date in November)
C．none of the above

单项选择题

The motivation for entering into a swap agreement is that:

A．it provides firms that face financial risks with a flexible way to manage that risk.
B．it provides firms that face financial risks with a fixed way to manage that risk.
C．it gives you an ability to swap amongst a diverse range of products.

单项选择题

Default risk in a forward contract:

A．only applies to the long, and is the probability that the short can not acquire the asset for delivery.
B．is the risk to either party that the other party will not fulfill their contractual obligation.
C．is lessened by the mark-to-market feature found in a typical forward contract.

单项选择题

James Jackson currently owns stock in PNG, Inc. , valued at $145 per share. Thinking that PNG is overbought and will decrease in price soon, Jackson writes a call option on PNG with an exercise price of $148 for a premium of $2.40. At expiration of the option, PNG stock is valued at $152 per share. What is the profit or loss from Jackson"s covered call strategy Jackson :

A．gained $5.40.
B．lost $4.60.
C．gained $9.40.

单项选择题

Which of the following is NOT an over-the-counter (OTC) derivative

A．A forward contract.
B．A swap agreement.
C．A futures contract.

单项选择题

The price of a stock is $44 per share, and the October put with an exercise price of $45 is selling for $3. The intrinsic value of the option is :

A．$1.00.
B．$2.00.
C．$3.00.

单项选择题

Financial derivatives also provide a powerful tool for limiting risks that individuals and firms face in the ordinary conduct of their business. This is an example of:

A．trading efficiency.
B．speculation.
C．risk management.