6 pts D Question 7 Using your answers/information from the previous 3 questions... If the Fl wanted to attempt a perfect macrohedge, how many Treasury bond futures contracts does it need? 10,197 contracts O 8,866 contracts 6,493 contracts O 7.541 contracts The next 3 questions are related to each other..you may need to refer to information contained in this set of questions to answer them correctly. Question 8 5 pts A U.S. based Fl has assets denominated in Euros of 150 million and Euro liabilities of 130 million. The Euro currency futures contract size is 125,000euro. Assume a perfect hedge, where hedge ratio is 1.0, the basis risk is zero and the movement of the hedge with the movement of the underlying currency is 100% inverse correlation What is the Fi's net exposure? It) 150 million euro 130 milion euro 20 million euro A U.S. based FI has assets denominated in Euros of 150 million and Euro liabilities of 130 million The Euro currency futures contract size is 125,000euro. Assume a perfect hedge, where hedge ratio is 1.0, the basis risk is zero and the movement of the hedge with the movement of the underlying currency is 100% inverse correlation What is the number of futures contracts to be utilized to hedge fully the Fi's currency risk exposure? 1.200 euro futures contracts 160 euro futures contracts 1,040 euro futures contracts O 125,000 euro futures contracts 6 pts D Question 10 Using the information and your answers from the previous 2 questions... A U.S. based Fl has assets denominated in Euros of 150 million and Euro liabilities of 130 million The Euro currency futures contract size is 125,000euro. Assume a perfect hedge, where hedge ratio is 1.0, the basis risk is zero and the movement of the hedge with the movement of the underlying currency is 100% inverse correlation. If the Euro futures price falls from $1.35/euro to $1.22/euro, what will be the impact on the Fl's futures position? O $2,600,000 O $1,400,000 $2.400,000 O $20,000,000 The next 3 questions are related to each other...you may need to refer to information contained in this set of questions to answer them correctly. D 5 pts Question 11 Assume a bank is concerned about an in interest rate shock. The Fl has a $100 million asset portfolio that has an average duration of 5.5 years. The average duration of its $80 million in liabilities is 4.0 years. Assets and liabilities are yielding 10 percent. The Fl uses put options on T- bonds to hedge against unexpected interest rate increases. The average delta (6) of the put options has been estimated at -0.5 and the average duration of the T-bonds is six years. The current market value of the T-bonds is $97,000. How many put option contracts should the Fl purchase to hedge its exposure against rising interest rates? The face value of a T-bond is $100,000. 790 contracts O 395.contracts O 412 contracts 206 contracts D Question 12 6 pts Assume a bank is concerned about an in interest rate shock. The Fl has a $100 million asset portfolio that has an average duration of 5.5 years. The average duration of its $80 million in liabilities is 4.0 years. Assets and liabilities are yielding 10 percent. The Fl uses put options on T- bonds to hedge against unexpected interest rate increases. The average delta (8) of the put options Question 12 Assume a bank is concerned about an in interest rate shock. The Fl has a $100 million asset portfolio that has an average duration of 5.5 years. The average duration of its $80 million in liabilities is 4.0 years. Assets and liabilities are yielding 10 percent. The Fl uses put options on T- bonds to hedge against unexpected interest rate increases. The average delta (6) of the put options has been estimated at -0.5 and the average duration of the T-bonds is six years. The current market value of the T-bonds is $97,000. If interest rates increase 25 basis points, what will be the change in value of the equity of the FI? $393.467.54 -$227,272.73 -$522.727.27 $575,000.00 6 pts Question 13 Using the information and your answers from the previous 2 questions... What will be the change in value of the T-bond option hedge position? O $522,477.27 gain O $227,278.97 gain $576,100.45 gain $392,756.66 gain The next 2 questions are related to each other...you may need to refer to information contained in this set of questions to answer them correctly. 6 pts D Question 14 An Fl manager purchases a zero-coupon bond that has two years to maturity. The manager paid $82.75 per $100 for the bond. The current yield on a one-year bond of equal risk is 11 percent, and the one-year rate in one year is expected to be either 15.75 percent or 14.25 percent. Either rate is equally probable. If the manager buys a one-year put option with an exercise price equal to the expected price of the bond in one year, what will be the exercise price of the option? $87.53 $86.39 O $82.75 $86.96 D Question 15 7 pts An Fl manager purchases a zero-coupon bond that has two years to maturity. The manager paid $82.75 per $100 for the bond. The current yield on a one-year bond of equal risk is 11 percent, and the one-year rate in one year is expected to be either 15.75 percent or 14.25 percent. Either rate is equally probable. Given the exercise price of the option, what premium should be paid for this option? 50.5700 per $100 of bond option purchased. Question 15 7 pts An Fl manager purchases a zero-coupon bond that has two years to maturity. The manager paid $82.75 per $100 for the bond. The current yield on a one-year bond of equal risk is 11 percent, and the one-year rate in one year is expected to be either 15.75 percent or 14.25 percent. Either rate is equally probable. Given the exercise price of the option, what premium should be paid for this option? O $0.5700 per $100 of bond option purchased. O $0.2850 per $100 of bond option purchased. O $0.2568 per $100 of bond option purchased. Question 16 5 pts A bank has assets of $800,000,000 and equity of $70,000,000. The assets have an average duration of 6.2 years, and the liabilities have an average duration of 3.4 years. A 7-year fixed-rate T-bond with the same coupon as the fixed-rate on the swap has a duration of 4.8 years, and the floating-rate bond that reprices annually. The bank wishes to hedge its balance sheet with swap contracts that have notional contracts of $50,000. What is the optimal number of swap contracts into which the bank should enter? 16,001 contracts 16,000 contracts 13,042 contracts 12,494 contracts 6 pts D Question 7 Using your answers/information from the previous 3 questions... If the Fl wanted to attempt a perfect macrohedge, how many Treasury bond futures contracts does it need? 10,197 contracts O 8,866 contracts 6,493 contracts O 7.541 contracts The next 3 questions are related to each other..you may need to refer to information contained in this set of questions to answer them correctly. Question 8 5 pts A U.S. based Fl has assets denominated in Euros of 150 million and Euro liabilities of 130 million. The Euro currency futures contract size is 125,000euro. Assume a perfect hedge, where hedge ratio is 1.0, the basis risk is zero and the movement of the hedge with the movement of the underlying currency is 100% inverse correlation What is the Fi's net exposure? It) 150 million euro 130 milion euro 20 million euro A U.S. based FI has assets denominated in Euros of 150 million and Euro liabilities of 130 million The Euro currency futures contract size is 125,000euro. Assume a perfect hedge, where hedge ratio is 1.0, the basis risk is zero and the movement of the hedge with the movement of the underlying currency is 100% inverse correlation What is the number of futures contracts to be utilized to hedge fully the Fi's currency risk exposure? 1.200 euro futures contracts 160 euro futures contracts 1,040 euro futures contracts O 125,000 euro futures contracts 6 pts D Question 10 Using the information and your answers from the previous 2 questions... A U.S. based Fl has assets denominated in Euros of 150 million and Euro liabilities of 130 million The Euro currency futures contract size is 125,000euro. Assume a perfect hedge, where hedge ratio is 1.0, the basis risk is zero and the movement of the hedge with the movement of the underlying currency is 100% inverse correlation. If the Euro futures price falls from $1.35/euro to $1.22/euro, what will be the impact on the Fl's futures position? O $2,600,000 O $1,400,000 $2.400,000 O $20,000,000 The next 3 questions are related to each other...you may need to refer to information contained in this set of questions to answer them correctly. D 5 pts Question 11 Assume a bank is concerned about an in interest rate shock. The Fl has a $100 million asset portfolio that has an average duration of 5.5 years. The average duration of its $80 million in liabilities is 4.0 years. Assets and liabilities are yielding 10 percent. The Fl uses put options on T- bonds to hedge against unexpected interest rate increases. The average delta (6) of the put options has been estimated at -0.5 and the average duration of the T-bonds is six years. The current market value of the T-bonds is $97,000. How many put option contracts should the Fl purchase to hedge its exposure against rising interest rates? The face value of a T-bond is $100,000. 790 contracts O 395.contracts O 412 contracts 206 contracts D Question 12 6 pts Assume a bank is concerned about an in interest rate shock. The Fl has a $100 million asset portfolio that has an average duration of 5.5 years. The average duration of its $80 million in liabilities is 4.0 years. Assets and liabilities are yielding 10 percent. The Fl uses put options on T- bonds to hedge against unexpected interest rate increases. The average delta (8) of the put options Question 12 Assume a bank is concerned about an in interest rate shock. The Fl has a $100 million asset portfolio that has an average duration of 5.5 years. The average duration of its $80 million in liabilities is 4.0 years. Assets and liabilities are yielding 10 percent. The Fl uses put options on T- bonds to hedge against unexpected interest rate increases. The average delta (6) of the put options has been estimated at -0.5 and the average duration of the T-bonds is six years. The current market value of the T-bonds is $97,000. If interest rates increase 25 basis points, what will be the change in value of the equity of the FI? $393.467.54 -$227,272.73 -$522.727.27 $575,000.00 6 pts Question 13 Using the information and your answers from the previous 2 questions... What will be the change in value of the T-bond option hedge position? O $522,477.27 gain O $227,278.97 gain $576,100.45 gain $392,756.66 gain The next 2 questions are related to each other...you may need to refer to information contained in this set of questions to answer them correctly. 6 pts D Question 14 An Fl manager purchases a zero-coupon bond that has two years to maturity. The manager paid $82.75 per $100 for the bond. The current yield on a one-year bond of equal risk is 11 percent, and the one-year rate in one year is expected to be either 15.75 percent or 14.25 percent. Either rate is equally probable. If the manager buys a one-year put option with an exercise price equal to the expected price of the bond in one year, what will be the exercise price of the option? $87.53 $86.39 O $82.75 $86.96 D Question 15 7 pts An Fl manager purchases a zero-coupon bond that has two years to maturity. The manager paid $82.75 per $100 for the bond. The current yield on a one-year bond of equal risk is 11 percent, and the one-year rate in one year is expected to be either 15.75 percent or 14.25 percent. Either rate is equally probable. Given the exercise price of the option, what premium should be paid for this option? 50.5700 per $100 of bond option purchased. Question 15 7 pts An Fl manager purchases a zero-coupon bond that has two years to maturity. The manager paid $82.75 per $100 for the bond. The current yield on a one-year bond of equal risk is 11 percent, and the one-year rate in one year is expected to be either 15.75 percent or 14.25 percent. Either rate is equally probable. Given the exercise price of the option, what premium should be paid for this option? O $0.5700 per $100 of bond option purchased. O $0.2850 per $100 of bond option purchased. O $0.2568 per $100 of bond option purchased. Question 16 5 pts A bank has assets of $800,000,000 and equity of $70,000,000. The assets have an average duration of 6.2 years, and the liabilities have an average duration of 3.4 years. A 7-year fixed-rate T-bond with the same coupon as the fixed-rate on the swap has a duration of 4.8 years, and the floating-rate bond that reprices annually. The bank wishes to hedge its balance sheet with swap contracts that have notional contracts of $50,000. What is the optimal number of swap contracts into which the bank should enter? 16,001 contracts 16,000 contracts 13,042 contracts 12,494 contracts