7. Case 2: Iternational Finance andDerivatives

Based on the information below, answer questions 7 to 11.

As part of your new job as FOREX broker, one of your clients askyou to take long position in the CME CHF/U.S. Dollar contract. Itis written on CHF 125,000 and quoted in $ per CHF. The strike priceis $1.1800 the maturity is 3 months. At initiation of the contract,the long posts an initial performance bond of $5,900. Themaintenance performance bond is $4,000. Your client will cancel hisposition after 5 days. Assume that the price of the future duringthe following five days is:

Day	Strike Price (close price, settlement price) (USD/CHF)
1	$1.1850
2	$1.1950
3	$1.1750
4	$1.1550
5	$1.1600

What is the value in US dollars of your client’s contract?

a. $125,000

b. $147,500

c. $105,932

d. $141,600

Answer: _____

8. What is the balance in yourclient’s account for day 2?

a. $5,900

b. $4,000

c. $7,775

d. $1,875

Answer: _____

9. How many margin calls you will maketo this client during the 5 days received?

a. 0

b. 1

c. 2

d. 3

Answer: _____

10. What is the net gain (or loss) forthis client?

a. $3,400

b. -$3,400

c. $2,500

d. -$2,500

Answer: _____

11. If this client decide, to useoptions instead future contracts to speculate over the apreaciationof the swiis franc (CHF), what could be the best strategy tofollow?

a. Buy a call over the CHF

b. Sell a call over the CHF

c. Buy a put over the CHF

d. Sell a put over the CHF

Answer: _____