1) Assume today's settlement price on a CME GBP futures contract is $1.45/GBPYou have a long position in one contract. Your performance bond account currently has a balance of $10,000. The next three days' settlement prices are $1.47, $1.44 and $1.48. What is the balance of the performance bond (margin) account at the end of days one, two, and three respectively? The contract size is GBP125,000.

a) $12,500.00 $11,250.00 $6,250.00

b) $7,500.00 $11,250.00 $6,250.00

c) $7,500.00 $11,250.00 $ 13,750.00

d) $12,500.00 $8,750.00 $13,750.00

e) $12,500.00 $8,750.00 $6,250.00

f) $7,500.00 $8,750.00 $6,250.00

2) If the beta for an unlevered firm is 1.20 , what is the beta if this firm were financed partially by equity? The debt- to-asset ratio is 0.4, the tax rate is 30%.

a) 1.76.

b) 1.48.

c) 1.50.

d) 1.20.

e) 1.68.

f) 1.54.

3) In the NYSE, Ford stock closed at USD100 per share. On the same day, the exchange rate was USD1.25/GBP. Ford stock trades as an ADR in the OTC market in the United Kingdom . Three Ford shares are packaged into one ADR. What is the approximate no- arbitrage GBP price of one ADR?

a) 80.00.

b) 240.00.

c) 375.00.

d) 125.00.

e) 300.00 .

f) 26.67.

4) Consider an investor who has purchased a put option on XYZ Corporation with a strike price of $50. The investor paid a premium of $2 for the put option . What will be the investor's return (in percentage) if the market price of XYZ stock at expiration is $60? At what market price of XYZ stock at expiration will the investor break even?

a) 100%; $ 50.00.

b) -100%; $48.00.

c) 0.00%; $50.00.

d) 0.00%; $0.00.

e) 400%; $52.00.

f) 500%; $52.00.

5) Which of the following is NOT a method a company might use to manage translation exposure?

a) Matching the currency of an asset with the currency of a corresponding liability.

b) Using financial derivatives such as futures , options , and swaps .

c) Diversifying operations and sourcing across different countries.

d) Adjusting the amount of debt held in foreign currencies.

e) Investing in unrelated business ventures to diversify overall business risk.

6) Which of the following statements regarding the difference between futures and forwards is correct?

a) Futures contracts have longer maturity periods compared to forwards.

b) Forwards require an initial margin, while futures don't require such margin.

c) Forwards are standardized contracts, whereas futures can be customized to suit specific needs.

d) Futures contracts are traded on organized exchanges, while forwards are traded over-the-counter (OTC ).

e) Futures contracts are only used for commodities, while forwards are used for financial instruments.