Need answers to the attached derivative practice test questions

Derivatives Practice Test Questions 1) Give three reasons why firms manage risks. 2) A commercial bank recognizes that its net income suffers whenever interest rates rise. What strategy should protect the bank against rising interest rates? 3) Name and explain two differences between futures and forward contracts. How are the two derivatives instruments alike? 4) (True or False) Since investors tend to dislike risk and like certainty, the more volatile a stock, the less valuable will be an option to purchase the stock, other things held constant. Explain your answer. 5) Suppose you believe that Johnson Company's stock price is going to increase from its current level of $22.50 sometime during the next 5 months. For #310.25 you can buy a 5-month call option giving you the right to buy 100 shares at a price of $25 per share. If you buy this option and Johnson's stock price actually rises to $45, what would your pre-tax net profit be? 6) You are long a Sep 65 put at $2. The current market value of XYZ stock is $70. a) Is this contract in, at or out-of-the money? b) At what stock price would you break even? c) How much intrinsic value does the option have? 7) What impact would an increase in each of the following have on the value of a call option: a) Current stock price b) Strike price c) Time to expiration 8) At investor sells 1 COD Jun 50 call at $3.50. Wat is the investor's maximum gain? 9) Company A can issue floating-rate debt at LIBOR + 1%, and it can issue fixed rate debt at 9%. Company B can issue floating-rate debt at LIBOR + 1.5%, and it can issue fixed-rate debt at 9.4%. Suppose A issues floating-rate debt and B issues fixed-rate debt, after which they engage in the following swap: A will make a fixed 7.9% payment to B, and B will make a floating-rate payment equal to LIBOR to A. What are the resulting net payments of A and B? 10) Suppose the September CBOT Treasury bond futures contract (6% coupon, 20 year maturity) has a quoted price of 89-09. What is the implied annual interest rate inherent in the futures contract? 11) Warner Motors' stock is trading at $20 a share. Call options that expire in three months with srike price of $20 sell for $1.50. If the stock price increase 10% to $22 a share, explain why the following occurs: a) The price of the call option will increase by less than $2 b) The percentage increase in the call option price will be more than 10% 12) A customer writes 1 ABC April 60 put at $5 when ABC stock is trading at $58. a) What is the time value of the option? b) At what stock price does the customer break even? 13) Which of the following investors are bearish? Explain your answer. a) Buyer of a call b) Writer of a call c) Buyer of a put d) Writer of a put