1. today is 11 June 2021, you are managing a portfolio which mirrors a particular index and has a current value of $5,400. Additionally, today you enter in a short futures contract on the same index maturing January 2021, the futures price today is $5,550.Suppose on 01 August 2021 you decide to close out your futures position at a price of $5,200. On the same day you sell your portfolio at a market value of $5,120. Select the true statement.

a.

You lose $280 on the index, gain $350 on the futures contract, netting a gain of $70.

b.

You lose $350 on the index, gain $280 on the futures contract, netting a loss of $70

c.

You gain $350 on the index, lose $280 on the futures contract, netting a gain of $70

d.

2.You gain $280 on the index, lose $350 on the futures contract, netting a loss of $70

An increase in the underlying assets dividend distributions will, other things held constant, ______ the value of a put option.

a.

decrease

b.

increase

c.

have no effect on

d.

Not enough information is given.

3.

An investor wrote a put with a strike price of $30 on a stock currently trading for $40. The premium on the put is $5. The maximum loss that this investor can suffer is ____.

a.

$30

b.

$40

c.

$35

d.

$25

4.

What is the price of a European call option on a non-dividend-paying stock when the stock price is $99, the strike price is $101, the continuously compounded risk-free rate is 2% per annum, the standard deviation is 35% per annum, and the time to maturity is six months? (hint: use the BS model)

a.

$11.36

b.

$10.30

c.

$9.31

d.

$8.38

5.

Jade short sells 1000 XYZ shares at the price of $20 per share. With an initial margin requirement of 40%, Jade needs to:

a.

Borrow 80,000 from the broker to buy shares.

b.

Borrow 20,000 from the broker to buy shares.

c.

Borrow shares and sell them when share price rises.

d.

Deposit 8,000 cash to meet initial margin requirement.