Part I: Short answer 1.(2.5 pts) Compared to forward contracts, future contracts are likely to be: A. standardized. B. larger in size. C. less subject to default risk. D. A and C 2.(2.5 pts) Two parties agree to a currency forward contract for 1 million at S1.15 per euro. At contract expiration, the curos trade at $1.17 per curo. In a deliverable forward contract, the A. short pays the long S1.15 million. B. short pays the long $0.02 million. C. long pays the short S0.02 million. D. long pays the short S1.17 million. E. long pays the short S1.15 million and gets back 1 million from the short 3.(2.5 pts) Assume Sun Microsystems expects to make a payment of 200,000,000 in 90 days and considers buying this amount of euro for the payment. A dealer provides a quote of S0.975 per euro for a currency forward contract to expire in 90 days with settlement in cash. Calculate the cash flow (ie. who pays what amount) in 90 days if Sun Microsystems enters into the forward contract and at the end of 90 days the spot rate is $0.9 per curo? 4. (2.5 pts) Oa 1/1/2018 AAA Corp. took the long position in a forward contract on E1 million at the forward price F- $1.39 per pound and delivery date on 61/2018. On 3/1/2018 AAA wants to cancel its forward position. What could AAA do? Please be specific 5. (5 pts) Consider a 125,000 curo futures contract in which the current future price is $1.232 per euro. The initial margin requirement is S2.310 per contract, and the maintainance margin requirement is S2,100 per contract. You go short 10 contracts and meet all margin calls but do not withdraw any excess margin. Assume that on the first day, the contract is established at the settlement price, so there is no mark-to-market gain or loss on that day a. Complete the table below Settle Daily Gain Day Required Beg. Depost Balance Ending Loss Balance Price Change S1.232 $1.238 $1.250 1.245 S1.232 O (Purchase) b. How mach are your total gains or losses by the end of day 4