Can someone help me solve this test. When you answer the test, can you write the solution below the answer.

TestId: 1001 For each problem, choose the answer choice that best answers the question. Name ___________________________________ 1 ____________ 13 ____________ 2 ____________ 14 ____________ 3 ____________ 15 ____________ 4 ____________ 16 ____________ 5 ____________ 17 ____________ 6 ____________ 18 ____________ 7 ____________ 19 ____________ 8 ____________ 20 ____________ 9 ____________ 21 ____________ 10 ____________ 22 ____________ 11 ____________ 23 ____________ 12 ____________ 24 ____________ 25 ____________ TestId: 1001 TestId: 1001 Question 1) On June 5th an investor sells 12 September soybean futures contracts. Each soybean contract is on 5,000 bushels of soybeans. On August 15th, the investor closes out the position in the soybean futures contracts by buying 12 September soybean futures contracts when the futures price is $10.15 per bushel. The investor's trading in the soybean futures contracts resulted in a loss of $6000. What was the price of the September soybean futures contract on June 5th, when the investor initially sold the futures contracts? 1) 2) 3) 4) $10.18 $10.05 $10.32 $10.25 TestId: 1001 Question 2) Which of the following are true regarding futures contracts? i. During the delivery period, arbitrage guarantees that the futures price must be the same as the spot price. ii. The price of a futures contract with delivery 6 months in the future must be higher than the price of a futures contract with delivery 3 months in the future iii. The main different between futures contracts and forward contracts is that futures contracts trade on an exchange and are settled each day whereas forward contracts are traded in the over-the-counter market and are settled only at delivery. 1) 2) 3) 4) ii and iii, but not i i, ii, and iii i and iii, but not ii iii only TestId: 1001 Question 3) Which of the following is true regarding the price of European stock options? i. ii. iii. iv. 1) 2) 3) 4) The price of a call option will increase if the price of the underlying stock increases. The price of a put option will increase if the price of the underlying stock increases. The price of a call option will increase if the volatility of the underlying stock increases. The price of a put option will increase if the volatility of the underlying stock increases. i and iii, but not ii or iv ii and iv, but not i or iii i, iii, and iv, but not ii i, ii, iii, and iv TestId: 1001 Question 4) In January, a food company learns that it will need to buy 100,000 bushels of oats in May for production purposes. The firm wants to hedge its exposure to changes in oat prices using oat futures contracts. Each oat futures contract is on 5,000 bushels of oats. Which of the following positions would create the most appropriate hedge? 1) 2) 3) 4) A long position of 20 June oat futures contracts A short position of 20 March oat futures contracts Short positions of 10 March oat futures contracts and 10 June oat futures contracts A short position of 20 June oat futures contracts TestId: 1001 Question 5) A U.S. Treasury bond pays semi-annual coupons with a coupon rate of 5%. Coupons are paid on March 15th and September 15th of each year. For Treasury bonds, interest is accumulated on an actual/actual basis. On July 12th, the bond is quoted at a clean price of $102. What is the amount of cash that would have to be paid (per $100 of face) to purchase the bond on July 12th? Round your answer to he nearest $0.01. 1) 2) 3) 4) $102.00 $103.66 $103.69 $103.62 TestId: 1001 Question 6) I have taken out a 7-year floating rate loan with semi-annual payments at a rate of LIBOR + 2.5%. I no longer want my semi-annual interest rate payments to change with interest rates. Which of the following strategies will result in my interest rate payments being constant? 1) 2) 3) 4) My interest rate payments are already constant. No trading is necessary. Enter a 7-year interest rate swap to pay a floating amount of interest and receive a fixed amount of interest. Enter a forward rate agreement to lend money in 6.5 years with repayment in 7 years (0.5 years after the loan in made). Enter a 7-year interest rate swap to pay a fixed amount of interest and receive a floating amount of interest. TestId: 1001 Question 7) A forward rate agreement was signed many years ago. According to the agreement, you will lend $10 million in 1 year (from today) and to be repaid in 3 years (from today, 2 years after the loan is made). The rate agreed to in the forward rate agreement is 3.4% using continuous compounding. Today, the 1-year continuously-compounded zero rate is 4.2% and the 3-year continuouslycompounded zero rate is 4.4%. What is today's present value, to you, of the forward rate agreement that you signed many years ago? Round all intermediate calculations to 6 decimal points. Choose the answer choice that is closest to your answer. Your answer may not perfectly match the correct answer choice due to rounding issues. 1) 2) 3) 4) -$208,648 $483,825 -$238,090 $919,881 TestId: 1001 Question 8) The price of a zero-coupon bond with face value of $100 maturing in 1 year is $92.50. The continuously compounded forward rate for a loan to be made in 0.5 years and to be paid back in 1 year (0.5 years after the loan is made) is 7.45%. What is the continuously compounded zero rate for a loan with maturity in 0.5 years? 1) 2) 3) 4) 7.475% 8.258% 8.142% 0.050% TestId: 1001 Question 9) 8 years ago you entered a 10-year currency swap in which you will pay a 4% semi-annually compounded rate on a notional of 15 million U.S. dollars and you will receive a 3% semi-annually compounded rate on a notional of 10 million euros. All interest payments are made semi-annually. Today, the price of a 2-year U.S. dollar bond paying semi-annual coupons with a coupon rate of 4% is 101 U.S. dollars (per 100 U.S. dollars of face) and the price of a 2-year euro bond paying semi-annual coupons with a coupon rate of 3% is 99 euros (per 100 euros of face). The exchange rate between U.S. dollars and euros is 1.25 U.S. dollars per euro. What is the value, in U.S. dollars from your point of view, of the currency swap? 1) 2) 3) 4) -$2,775,000 -$300,000 $300,000 $395,923 TestId: 1001 Question 10) A baking company wants to hedge its exposure to the price of vegetable oil. Because there is no futures contract on vegetable oil, it is considering hedging using either corn futures or soy futures. The firm has calculated that the appropriate hedge ratio to use when hedging with corn futures is to hedge 1.52 gallons of vegetable oil with 1 bushel of corn. If the firm were to hedge the vegatable oil with soy futures, the appropriate hedge ratio to use is to hedge 0.97 gallons of vegetable oil with 1 bushel of soy. The standard deviation of the monthly changes in the price of vegetable oil is $2.00 per gallon. The standard deviation of the monthly changes in the futures price of corn is $1.25 per bushel. The standard deviation of the monthly changes in the futures price of soy is $2.00 per bushel. Which futures contract provides a better hedge of vegetable oil, corn or soy? 1) 2) 3) 4) Corn Soy Both corn and soy are equally effective at hedging vegetable oil Neither corn nor soy provides an acceptable hedge TestId: 1001 Question 11) Which of the following are accurate statements regarding the credit crisis of 2007? i. Banks failed to do an adequate job of screening mortgage applicants for credit-worthiness. ii. Because banks sold the mortgages they made, banks did not incur any losses during the credit crisis. iii. Teaser rate mortgages caused many home-owners to experience large increases in their monthly mortgage payments, forcing them to default on their mortgages. 1) 2) 3) 4) iii only i and iii, but not ii i only ii and iii, but not i TestId: 1001 Question 12) The 1-year continuously-compounded zero rate is 4%. The 2-year continuously-compounded zero rate is 5%. A financial institution is willing to enter into a forward rate agreement to borrow or lend in 1 year with repayment to occur in 2 years (1 year after the loan is made) at a continuously compounded rate of 6.5%. Which of the following are true? Answer the question from your point of view, not from the bank's point of view. i. There is no opportunity for a risk-free profit. ii. I can earn a risk-free profit by borrowing today for 2 years at 5%, lending today for 1 year at 4%, and entering a forward rate agreement to lend at 6.5% for one year in one year. iii. I can earn a risk-free profit by lending today for 2 years at 5%, borrowing today for 1 year at 4%, and entering a forward rate agreement to borrow at 6.5% for one year in one year. 1) 2) 3) 4) i only ii and iii, but not i ii only iii only TestId: 1001 Question 13) On January 8th an investor takes a 7 contract short position in the gold futures contract for June delivery. The June futures price is $1,212 per ounce. Each contract is on 100 ounces of gold. The initial margin requirement is $2,000 per contract. The maintenance margin is $1,800 per contract. The June gold futures prices for subsequent trading days are shown below. How much money will be in the margin account on January 12th? Assume that no withdrawals are made from the margin account at any time. Also assume that any margin call is satisfied on the day the margin call is generated. Date January 9th January 10th January 11th January 12th 1) 2) 3) 4) $18,400 $14,000 $12,600 $23,800 Futures Price $1,204 $1,202 $1,208 $1,198 TestId: 1001 Question 14) An investor purchased 300 European put options with a strike price of $44 for $4.35 each. At expiration, the spot price of the underlying stock is $43. What is the investor's profit from the trade? 1) 2) 3) 4) -$1,005 -$1,305 $1,305 $300 TestId: 1001 Question 15) On May 3rd, 2015, you buy 8 June 3-month eurodollar futures contracts when the futures price is 97.80. On June 17th, 2015, the final settlement (delivery) date for the contracts you purchased, your total accumulated profits on your futures position is a loss of $22,000. What is the quoted 3-month LIBOR rate on June 17th, 2015? 1) 2) 3) 4) 6.60 3.30 4.20 2.95 TestId: 1001 Question 16) Which of the following are true regarding American options? i. When comparing two American call options on the same stock with the same strike, the price of the call with the longer time to expiration will be lower than the price of the call with a shorter time to expiration. ii. When comparing two American put options on the same stock with the same strike, the price of the put with the longer time to expiration will be lower than the price of the put with a shorter time to expiration. iii. When comparing two American call options on the same stock with the same time to expiraton, the price of the call with the higher strike will be higher than the price of the call with the lower strike. iv. When comparing two American put options on the same stock with the same time to expiraton, the price of the put with the higher strike will be higher than the price of the put with the lower strike. 1) 2) 3) 4) iii and iv, but not i or ii ii and iv, but not i or iii i, ii, and iv, but not iii iv only TestId: 1001 Question 17) Which of the following are true about a forward price on a stock that pays no dividends? When answering this question, assume that the risk-free rate is positive. i. ii. iii. iv. 1) 2) 3) 4) The forward price will be more than the spot price. The forward price will be less than the spot price. The 6-month forward price will be greater than the 3-month forward price. The 6-month forward price will be less than the 3-month forward price. iii and iv, but not i or ii i and iii, but not ii or iv ii and iv, but not i or iii i and ii, but not iii or iv TestId: 1001 Question 18) The current price of a stock is $35.25. Which of the following are true regarding options written on that stock that expire today? i. ii. iii. iv. 1) 2) 3) 4) An investor who owns a call option with a strike price of $36 should exercise the call. An investor who owns a put option with a strike price of $35 should exercise the put. An investor who owns a call option with a strike price of $34 should exercise the call. An investor who owns a put option with a strike price of $34 should exercise the put. i and iii, but not ii or iv ii and iii, but not i or iv ii and iv, but not i or iii iii only TestId: 1001 Question 19) My portfolio consists of 3 bond positions. I own $20 million worth of bond A, which has a duration of 8.5 years. I own $30 million worth of bond B, which has a duration of 11.3 years. I own $50 million worth of bond C, which has duration of 9.8 years. What is the duration of my bond portfolio? 1) 2) 3) 4) 29.6 years 25.42 years 9.99 years 9.87 years TestId: 1001 Question 20) The 3 year continuously compounded zero-rate is 6.2%. The continuously compounded forward rate for a loan to be made 2 years from now and to be paid back 3 years from now (1 year after the loan is made) is 6.6%. What is the price of a $100 face value zero-coupon bond with maturity in 2 years? 1) 2) 3) 4) $94.18 $88.69 $87.99 $94.00 TestId: 1001 Question 21) Which of the following are true? i. The basis of a futures contract is the difference between to futures price and the spot price. ii. Cross-hedging is when we use a futures contract on one asset to hedge risk associated with a different, but similar, asset. iii. Basis risk is the risk that the grade of asset delivered will not be the grade desired by the long party in a futures contract. iv. Cross-hedging is the use of futures contracts with several different delivery dates to hedge exposure to a certain risk. 1) 2) 3) 4) ii only ii and iii, but not i or iv i and ii, but not iii or iv iii only TestId: 1001 Question 22) The price of a non-dividend-paying stock is $42. A 2-month European call option on the stock with a strike price of $43 is priced at $1.80. The continuously compounded 2-month risk-free rate is 3.2%. What is the price of a 2-month European put option on this same stock with a strike price of $43? 1) 2) 3) 4) $2.80 $1.80 $1.45 $2.57 TestId: 1001 Question 23) The S&P 500 index level is 2150. The index pays a dividend yield of 2.5%. The 1-year continuouslycompounded zero rate is 1.5%. The price of the 1-year S&P 500 index forward contract is 2140. Which of the following trades are part of a strategy that will profit from the mispricing of the futures contract? i. ii. iii. iv. 1) 2) 3) 4) Take a long position in the futures contract. Take a short position in a basket of stocks that tracks the S&P 500 index perfectly. Take a short position in the futures contract. Take a long position in a basket of stocks that trackes the S&P 500 index perfectly. iii and iv, but not i or ii i only ii only i and ii, but not iii or iv TestId: 1001 Question 24) The 2-year Australian dollar forward price is $0.75. The continuously-compounded U.S. dollar 2-year zero rate is 3%. The spot price of the Australian dollar is $0.78. What is the continuously-compounded 2-year zero rate on Australian dollars? 1) 2) 3) 4) -1.96% 3.24% 4.96% 1.96% TestId: 1001 Question 25) It is January 23rd. I own a portfolio of bonds and I want to hedge out my exposure to interest rate risk using June Treasury bond futures. The June forward value (calculated based on forward rates) of my portfolio is $36 million. The June duration of my portfolio (calculated using forward rates) is 13.6 years. The quoted price of the June Treasury bond futures contract is 101-4 (quoted in dollars and 32nds of a dollar per $100 face). The June duration (calculated using forward rates) of the cheapest-to-deliver bond underlying the futures contract is 16.1 years. Each Treasury bond futures contract is on $100,000 of face value. What position in the June Treasury futures should I take to hedge out my portfolio's interest rate risk? 1) 2) 3) 4) Short 360 June Treasury bond futures contracts Long 360 June Treasury bond futures contracts Long 301 June Treasury bond futures contracts Short 301 June Treasury bond futures contracts