国际金融英文版试题chapter6

INTERNATIONALFINANCE

AssignmentProblems(6)Name:Student#:

I.Choosethecorrectanswerforthefollowingquestions(onlycorrectanswer)(3creditsforeachquestion,totalcredits3x20=60)

1.WhichofthefollowingisNOTtrueregardingforwardcontracts?

A.Thematurityofforwardcontractsisflexible.

B.ForwardcontractsaretradedbothonorganizedexchangesandOTCmarket.

C.Forwardcontractsareusedtospeculatethediscrepanciesoftheexchangerates.

D.Thesizeofaforwardcontractisusuallymuchlargerthanthatofthefuturesoroptions.

2.WhichofthefollowingisNOTacontractspecificationforcurrencyfuturestradingonanorganizedexchange?

A.maturitydate

B.maintenancemarginrequirement

C.sizeofthecontract

D.Alloftheabovearespecified

3.Afuturescontractisverysimilartoaforwardcontract,because__________.

A.bothareagreementsbetweentwopartiestodeliverrelativecurrenciesatacertaintimeforacertainprice

B.botharestandardizedcontracts

C.bothcanbeusedtoeliminatethedefaultrisk

D.botharerequiredtophysicallydelivertheunderlyingcurrency

4.Iftheamountinthemarginaccountdropsbelowthemaintenancemargin,thefuturescontractholderwill__________.

A.closeoutthecontract

B.beissuedamargincall

C.writeanewcontract

D.notifytheexchange

5.WhichofthefollowingisNOTadifferencebetweenacurrencyfuturescontractandaforwardcontract?

A.Thecounterpartytothefuturesparticipantisunknownwiththeclearinghousesteppingintoeachtransactionwhereastheforwardcontractparticipantsareindirectcontactsettingtheforwardspecifications.

B.Asinglesalescommissioncoversboththepurchaseandsaleofafuturescontractwhereasthereisnospecificsalescommissionwithaforwardcontractbecausebanksearnaprofitthroughthebid-askspread.

C.Thefuturescontractismarkedtomarketdailywhereasaforwardcontractisonlyduetobesettledatmaturity.

D.Alloftheabovearedifferencesbetweenacurrencyfuturescontractandaforwardcontract.

6.AssumethatCitibankinNewYorkquotesa30-dayforwardrateoneuroof$0.7533whiletheSingaporeInternationalMonetaryExchange(SIMEX)eurofuturesfordeliveryin30daysisbeingquotedat$0.7522.Youcanmakearisklessprofitby__________.

A.takingashortpositiononeuroinSIMEXeurofuturescontractandalongpositiononeurointheforwardcontract

B.takingalongpositiononeuroinSIMEXeurofuturescontractandashortpositiononeurointheforwardcontract

C.takingashortpositionondollarinSIMEXeurofuturescontractandashortpositionondollarintheforwardcontract

D.takingalongpositionondollarinSIMEXeurofuturescontractandalongpositionondollarintheforwardcontract

7.Themainfunctionofthe“Markingtomarket〞procedurecomesdownto__________.

A.avoiddefaultriskinherentinforwardcontracts

B.coverriskexposurearisenfromtheinternationaltransactions

C.protectthecontractholdersfromsufferingtheloss

D.alloftheabove

8.Thebuyerofafuturescontractisrequiredtoputasumofmoneyintheexchange.Thissumofmoneyiscalled__________.

A.downpayment

B.initialmargin

C.premium

D.commission

9.Whenreadingthefuturesquotationinthenewspaper,thecolumnheadingindicatingthenumberofcontractsoutstandingonthepreviousdayiscalled__________.

A.percentagechange

B.settle

C.openinterest

D.estimatedvolume

10.AputoptiononJapaneseyeniswrittenwithastrikepriceof¥88/$.Whichofthefollowingspotratemaximizesyourprofitifyouchoosetoexecutethecontractbeforematurity?

A.¥70/$

B.¥80/$

C.¥90/$

D.¥100/$

11.Theagreedpriceinacurrencyoptioncontractiscalledthe__________.

A.forwardprice

B.futuresprice

C.exerciseprice

D.spotprice

12.Foracurrencyputoptionifthefuturespotrateisabovethestrikeprice,theoptionissaidtobe__________.

A.in-the-money

B.at-the-money

C.out-of-the-money

D.break-even

13.Thewriterofanoptioncontracthas__________whereastheholderhas__________.

A.obligation;choice

B.right;responsibility

C.choice;obligation

D.priority;privilege

14.Assumeyouboughtacalloptionwiththeexercisepriceof$1.55/₤inChicagoMercantileExchangeonSeptember6.ThecontractwouldbeexpiredinDecember.Ifthespotexchangeratewas$1.50/₤onOctober10,theintrinsicvalueofthiscalloptiononthatdaywouldbe__________.

A.$0.05

B.-$0.05

C.$0

D.Noneoftheabove,becausethecontractdoesn’texpireonOctober10.

15.Theforeign-currencyaccountspayablecanbehedgedbybuyinga__________optionontheforeigncurrency,whereasaccountsreceivablecanbehedgedbybuyinga__________optionontheforeigncurrency.

A.call;put

B.put;call

C.American;European

D.European;American

16.Mr.Bulltriestospeculateonthedirectionoftheentirestockmarket,themostefficientmethodheshoulduseistoacquire__________.

A.astockindexfutures

B.aportfoliocontainingstocksofalltradedcompanies

C.acurrencyforwardcontract

D.acurrencyfuturescontract

17.Theamountthattheoptionpurchasermustpaytoobtainanoptioncontractmaybedescribedasoption__________.

A.cost

B.premium

C.price

D.Alloftheabove

18.ACanadiandollaroptionquotedas“C$Sep9800put〞issellingontheCMEatapriceof$0.0026/C$.ThesizeofthecontractisC$100,000.Assumethespotexchangerateonthematuritydayturnsouttobe$0.95/C$.Youwillhave__________ifyouhold10contracts.

A.$30,000netprofit

B.$30,000netloss

C.$27,400netprofit

D.$27,400netloss

19.Afixed-to-fixedcurrencyswapisusedto__________.

A.hedgecurrencyrisk

B.speculatediscrepanciesoftheexchangerate

C.makearisklessprofit

D.Alloftheabove

20.ExxonandChaseManhattanBankreachedanagreement.Inthenexttwoyears,ExxonwouldpayfixedpriceofoiltoChaseManhattanBankonJune30,andChaseManhattanBankwouldpayfloatingpriceofoilaccordingtothespotpriceonthesameday.Thisisanexampleof__________.

A.fixed-for-floatingcurrencyswap

B.commodityswap

C.swaption

D.equityswap

II.Problems(40Credits)

1.SamuelSamosirtradescurrenciesforPeregrineFundsinJakarta,Indonesia.HefocusesnearlyallofhistimeandattentionontheU.S.dollar/Singaporedollar($/S$)exchangerate.Thecurrentspotrateis$0.6000/S$.Afterconsiderablestudythisweek,hehasconcludedthattheSingaporedollarwillappreciateversustheU.S.dollarinthecoming90days,probablytoabout$0.7000/S$.HehasthefollowingoptionsontheSingaporedollartochoosefrom:(3creditsforeachquestion,totalcredits3x5=15credits)

a.ShouldSamuelbuyaputonSingaporedollarsoracallonSingaporedollar?

b.Usingyouranswertoparta,whatisSamuel’sbreak-evenprice?

c.Usingyouranswertoparta,whatisSamuel’sgrossprofitandnetprofit(includingthepremium)ifthespotrateattheendofthe90daysisindeed$0.7000/S$?

d.Usingyouranswertoparta,whatisSamuel’sgrossprofitandnetprofit(includingthepremium)ifthespotrateattheendofthe90daysisindeed$0.8000/S$?

e.Usingyouranswertoparta,whatisthecontract’stimevalueattheendofthe90days?

2.JenniferMagnussen,acurrencytraderforChicago-basedBlackRiverInvestments,usesthefuturesquotesbelowontheBritishpoundtospeculateonitsvalue:(5creditsforeachquestion,totalcredits4x3=12credits)

a.IfJenniferbuys5JunepoundfuturesrightafterCMEopens,andthespotrateatmaturityis$1.3980/pound,whatisthevalueofherposition?

b.IfJennifersells12Marchpoundfutureswiththeopeningquote,andthespotrateatmaturityis$1.4560/pound,whatisthevalueofherposition?

c.IfJenniferbuys10Junepoundfuturesat$1.3500/₤intheearlyafternoon,andtheclosingrateattheendofthedayis$1.3246/poundinsteadof$1.4162/pound,whatwillhappen?Explain.

3.YouheadthecurrencytradingdeskatBearingsBankinLondon.AsthemiddlemaninadealbetweentheU.K.andDanishgovernment,youhavejustpaid₤1,000,000totheU.K.governmentandhavebeenpromisedDKr8,438,000fromtheDanishgovernmentinthreemonths.Allelseconstant,youwouldn’tmindleavingthislongkronepositionopen.However,nextmonth’sreferenduminDenmarkmayclosethepossibilityofDenmarkjoiningtheEuropeanUnion.Ifthishappens,youexpectthekronetodroponworldmarkets.Asahedge,youareconsideringpurchasingacalloptiononpoundssterlingwithanexercisepriceofDKr8.4500/₤thatsellsforDKr0.1464/₤.(13creditstotal)

a.Fillinthecalloptionvaluesatexpirationthefollowingtable.(3credits)Spotrateatexpiration(DKr/₤):8.008.408.428.448.468.48

Callvalueatexpiration(DKr/₤):

b,Basedonthepreviousinformation,drawthepayoffprofileforalongkroneputoptionatexpiration.Notethattheseexchangeratesarereciprocalsofthoseinproblema.(3credits)

Spotrateat

expiration(₤/DKr).12500.11905.11876.11848.11820.11792Putvalueat

expiration(₤/DKr)

c.Labelyouraxesandploteachofthepoints.Drawaprofit/lossgraphforthislongkroneputatexpiration.(7credits)

AnswerstoAssignment(6)

I.(60credits)

1.B2.D3.A4.B5.D6.B7.A8.B9.C10.A1