Suppose that it is February 20 and a treasurer realizes that on July 17 the company will have to issue $10 million of commercial paper with a maturity of 270 days. If the paper were issued today, the company would realize $9,600,000. (In other words, the company would receive $9,600,000 for its paper and have to redeem it at $10 million in 270 days' time.) The September Eurodollar futures price is quoted as 96.00. How should the treasurer hedge the company's exposure if using the September Eurodollar futures contracts?

Question 6 options:

Long 10 contracts

Short 15 contracts

Short 19 contracts

Short 29 contracts

Question 7(3 points)

Suppose that the 9-month and 12-month LIBOR rates are 2.4% and 2.8%, respectively. Assume that rates are quarterly compounded, and that LIBOR is used as the risk-free discount rate. What is the forward LIBOR rate (quarterly compounded) for the period between 9 months and 12 months?

Question 7 options:

1.59%

3.20%

3.68%

4.00%

When the non-dividend paying stock price is $20, the strike price is $20, the risk-free rate is 2%, the volatility is 20% and the time to maturity is 3 months which of the following is the price of a European call option on the stock?

Question 8 options:

20.00*N(0.1) - 19.90*N(0.0)

19.90*N(0.1) - 20.00*N(0.0)

20.00*N(0.2) - 19.70*N(0.1)

19.70*N(0.2) - 20.00*N(0.1)