1. You purchase an interest rate futures contract that has an initial margin requirement of 9% and a futures price of $130,538. The contract has a $100,000 underlying par value bond. If the futures price falls to $126,500, you will experience a ______ loss on your money invested.

Multiple Choice

A 24.00%

B 57.37%

C 45.37%

D 34.37%

2. Malmentier SA stock is currently priced at $120, and it does not pay dividends. The instantaneous risk-free rate of return is 7%. The instantaneous standard deviation of Malmentier SA stock is 40%. You want to purchase a put option on this stock with an exercise price of $125 and an expiration date 30 days from now. According to the Black-Scholes OPM, you should hold __________ shares of stock per 100 put options to hedge your risk.

A 21

B 25

C 60

D65