1. Suppose you purchase a Treasury bond futures contract at a price of 95 percent of the face value, $100,000. Assume that the Treasury bond futures price falls to 93.8 percent. What is your loss or gain?

My Answer: _______________________

2. Dudley Savings Bank wishes to take a position in Treasury bond futures contracts, which currently have a quote of 116 100. Dudley Savings thinks interest rates will go down over the period of investment. The face value of the bond underlying the futures contract is $100,000. Calculate the net profit to Dudley Savings Bank if the price of the futures contracts increases to 116 210.

My Answer: _______________________

3. You have taken a long position in a call option on IBM common stock. The option has an exercise price of $144 and IBMs stock currently trades at $148. The option premium is $6 per contract. What is your net profit on the option if IBMs stock price increases to $158.50 at expiration of the option and you exercise the option?

My Answer: _______________________

4. You have purchased a put option on Pfizer common stock. The option has an exercise price of $45 and Pfizers stock currently trades at $47. The option premium is $0.60 per contract. What is your net profit on the option if Pfizers stock price falls to $41 and you exercise the option?

My Answer: _______________________

5. You have purchased a put option on Kimberly Clark common stock. The option has an exercise price of $75.00 and Kimberly Clarks stock currently trades at $76.18. The option premium is $1.50 per contract. Assume that 100 shares are traded. Calculate your net profit on the option if Kimberly Clarks stock price falls to $73.00 and you exercise the option.

My Answer: _______________________

6. A stock is currently selling for $80 per share. You could purchase a call with a strike price of $76 for $9. You could purchase a put with a strike price of $76 for $3. Calculate the intrinsic value of the call option.

My Answer: _______________________