the attached has about 18 questions. Some highlighted in yellow are already answered. I have 3 hours.

QUESTION 30 1. For the next 3 questions suppose the following data holds : Suppose you have a portfolio that contains SF 2,500,000 par value in 10% Swiss corporate bonds which pays coupons semi-annually. These bonds come due 90 days from today. 2. How much will be the final check which includes the principal and the last interest? $2,550,0 00 $2,625,0 00 $2,650,0 00 $2,700,0 00 $2,750,0 00 1 points QUESTION 31 1. Continuation of the previous problem: Suppose you have a portfolio that contains SF 2,500,000 par value in 10% Swiss corporate bonds which pays coupons semi-annually. These bonds come due 90 days from today. 2. How can you hedge against the foreign exchange risk by using the futures market? How many contracts do you have to have? Short or long? There are 125,000 Swiss Francs in one SFr futures contract. 17.5 contracts short 17.5 contracts long 21 contracts short 21 contracts long 1 points QUESTION 32 1. Continuation of the previous problem: Suppose you have a portfolio that contains SF 2,500,000 par value in 10% Swiss corporate bonds which pays coupons semi-annually. These bonds come due 90 days from today. 2. How can you use Swiss Franc foreign currency options? How many contracts of what type of option should be purchased? There are 62,500 Swiss Francs in one SFr option contract. 20.8 puts 42 puts 20.8 calls 42 calls 1 points QUESTION 33 1. For the next 3 questions suppose the following data holds: Assume that the spot exchange rate of Swiss Franc is $0.61 and the six-month forward rate is $0.62. Also assume the six-month Eurodollar rate is 6%. 2. What is the minimum price that a six-month European call option on Swiss Franc with a strike price of 59 (i.e., $0.59) should sell for in a rational market? 1.21 cents 1.67 cents 2.54 cents 2.91 cents 3.23 cents 1 points QUESTION 34 1. Continuation of the previous problem: Assume that the spot exchange rate of Swiss Franc is $0.61 and the six-month forward rate is $0.62. Also assume the six-month Eurodollar rate is 6%. 2. What is the minimum price that a six-month European put option on Swiss Franc with a strike price of 66 (i.e., $0.66) should sell for in a rational market? 2.21 cents 3.33 cents 3.88 cents 4.21 cents 4.45 cents 1 points QUESTION 35 1. Continuation of the previous problem: Assume that the spot exchange rate of Swiss Franc is $0.61 and the six-month forward rate is $0.62. Also assume the six-month Eurodollar rate is 6%. 2. What is the six-month Swiss interest rate if the interest parity relationship holds? 2.68 % 3.35 % 4.23 % 4.55 % 5.12 % 1 points QUESTION 36 1. For the next 8 questions suppose the following data holds: Philadelphia Exchange Swiss Franc (SF) 65.21 Calls SF 62,500 - cents per unit Vol. Last 64 May 20 1.85 65 May 30 0.50 64 Sep 20 X 65 Sep 10 1.20 2. What is the time value of 64 May SF call option? $.64 $.75 Puts Vol. 10 50 40 20 Last 0.30 0.50 Y 0.70 $1.2 1 $1.5 1 $1.9 5 1 points QUESTION 37 1. Continuation of the previous problem: Philadelphia Exchange Swiss Franc (SF) 65.21 Calls SF 62,500 - cents per unit Vol. 64 May 20 65 May 30 64 Sep 20 65 Sep 10 2. What is the time value of 65 May SF put option? $0. 2 Puts Last 1.85 0.50 X 1.20 Vol. 10 50 40 20 Last 0.30 0.50 Y 0.70 $0. 3 $0. 4 $0. 5 $0. 6 1 points QUESTION 38 1. Continuation of the previous problem: Philadelphia Exchange Swiss Franc (SF) 65.21 SF 62,500 - cents per unit 64 May 65 May 64 Sep 65 Sep Calls Vol. 20 30 20 10 Puts Last 1.85 0.50 X 1.20 Vol. 10 50 40 20 Last 0.30 0.50 Y 0.70 2. Which of the following is out-of-the-money? 64 May call 65 May call 64 Sep call 64 May put 1 points QUESTION 39 1. Continuation of the previous problem: Philadelphia Exchange Swiss Franc (SF) 65.21 Calls SF 62,500 - cents per unit Vol. Last 64 May 20 1.85 65 May 30 0.50 64 Sep 20 X 65 Sep 10 1.20 2. How much does a contract of 65 Sep put option cost? Puts Vol. 10 50 40 20 Last 0.30 0.50 Y 0.70 $1,437. 25 $217.5 $537.5 $437.5 1 points QUESTION 40 1. Continuation of the previous problem: Philadelphia Exchange Swiss Franc (SF) 65.21 SF 62,500 - cents per unit 64 May 65 May 64 Sep 65 Sep Calls Vol. 20 30 20 10 Puts Last 1.85 0.50 X 1.20 Vol. 10 50 40 20 Last 0.30 0.50 Y 0.70 2. Suppose you buy one May 64 SF call option on April 22 and the price of SF goes up to $.75 at the expiration. If you exercise the option what is the profit from the investment? $2,250. 00 $2,750. 00 $4,215. 35 $5,718, 75 $6,233. 25 1 points QUESTION 41 1. Continuation of the previous problem: Philadelphia Exchange Swiss Franc (SF) 65.21 Calls Puts SF 62,500 - cents per unit Vol. Last Vol. Last 64 May 20 1.85 10 0.30 65 May 30 0.50 50 0.50 64 Sep 20 X 40 Y 65 Sep 10 1.20 20 0.70 2. Suppose you buy one May 65 SF put option on April 22 and the price of SF goes down to $.61 at the expiration. If you exercise the option what is the profit from the investment? $987.5 0 $1,052. 50 $2,125 $2,545. 50 $2,776. 50 1 points QUESTION 42 1. Continuation of the previous problem: Philadelphia Exchange Swiss Franc (SF) 65.21 Calls Puts SF 62,500 - cents per unit Vol. Last Vol. Last 64 May 20 1.85 10 0.30 65 May 30 0.50 50 0.50 64 Sep 20 X 40 Y 65 Sep 10 1.20 20 0.70 2. Given the call prices above, which one of the following could be the premium of the 64 Sep SF call option (X)? $0. 5 $1. 5 $1. 7 $1. 8 $1. 9 1 points QUESTION 43 1. Continuation of the previous problem: Philadelphia Exchange Swiss Franc (SF) 65.21 Calls Puts SF 62,500 - cents per unit Vol. Last Vol. Last 64 May 20 1.85 10 0.30 65 May 30 0.50 50 0.50 64 Sep 20 X 40 Y 65 Sep 10 1.20 20 0.70 2. Given the out prices above, which one of the following could be the premium of the 64 Sep SF put option (Y)? $0. 2 $0. 3 $0. 4 $0. 7 $0. 8 1 points QUESTION 44 1. For the next 4 questions suppose the following data holds: Polaris is taking out a $50,000,000 two-year loan at a variable rate of LIBOR plus 1.00%. The LIBOR rate will be reset each year at an agreed upon date. The current LIBOR rate is 4.00% per year. The loan has an upfront fee of 1.00%. What is the all-in-cost (AIC, i.e., the internal rate of return) of the Polaris loan including the LIBOR rate, fixed spread and upfront fee? Assume the LIBOR rate stays at 4% for the next two years. 5.11 % 5.54 % 5.76 % 6.25 % 6.67 % 1 points QUESTION 45 1. Continuation of the previous problem: Polaris is taking out a $50,000,000 two-year loan at a variable rate of LIBOR plus 1.00%. The LIBOR rate will be reset each year at an agreed upon date. The current LIBOR rate is 4.00% per year. The loan has an upfront fee of 1.00%. If the LIBOR rate jumps to 6.00% after the first year, what will be the AIC for Polaris for the entire loan? 5.78 % 6.52 % 6.79 % 7.12 % 8.12 % 1 points QUESTION 46 1. Continuation of the previous problem: Polaris is taking out a $50,000,000 two-year loan at a variable rate of LIBOR plus 1.00%. The LIBOR rate will be reset each year at an agreed upon date. The current LIBOR rate is 4.00% per year. The loan has an upfront fee of 1.00%. Polaris buys the forward rate agreement (FRA) from an insurance company. According to the contract, if LIBOR rises above 4%, the initial forecast, the insurance company would pay to Polaris at the end of each year the difference between the LIBOR and 4%. In the opposite case, i.e., if LIBOR falls below 4%, Polaris would pay the difference between 4% and real LIBOR to the insurance company. The purchase of the forward rate agreement will cost $200,000, paid at the time of the initial loan. Calculate the all-incost (AIC) of the loan based on the assumption that the LIBOR rate jumps to 6.00% after the first year. 5.11 % 5.54 % 5.76 % 6.55 % 6.67 % 1 points QUESTION 47 1. Continuation of the previous problem: Polaris is taking out a $50,000,000 two-year loan at a variable rate of LIBOR plus 1.00%. The LIBOR rate will be reset each year at an agreed upon date. The current LIBOR rate is 4.00% per year. The loan has an upfront fee of 1.00%. 2. Suppose Polaris decides to engage in an interest rate swap in which Polaris would pay fixed 5% and receive LIBOR on a notional value of $50 million. Calculate the all-in-cost (AIC) of the loan with the interest rate swap. 5.11 % 5.54 % 5.76 % 6.55 % 6.67 % 1 points QUESTION 48 1. For the next 5 questions suppose the following data holds: Carlton Corporation entered into a three-year cross currency interest rate swap to receive U.S. dollars and pay Swiss francs. The notional principal is $10 million. The 3-year swap rates are quoted in the next table: Swiss Franc U.S. dollar Bid Ask Bid Ask 1.93% 2.01% 5.52% 5.59% Assume the current spot exchange rate is S = SF1.25/$. How much U.S. dollars will Carlton receive in year 1 as a result of the currency swap? $201,0 00 $552,0 00 $559,0 00 $625,0 00 $650,0 00 1 points QUESTION 49 1. Continuation of the previous problem: Carlton Corporation entered into a three-year cross currency interest rate swap to receive U.S. dollars and pay Swiss francs. The notional principal is $10 million. The 3-year swap rates are quoted in the next table: Swiss Franc U.S. dollar Bid Ask Bid Ask 1.93% 2.01% 5.52% 5.59% Assume the current spot exchange rate is S = SF1.25/$. How much Swiss francs will Carlton pay in year 1 as a result of the currency swap? SF193,0 00 SF201,0 00 SF251,2 50 SF333,5 00 SF350,5 00 1 points QUESTION 50 1. Continuation of the previous problem: Carlton Corporation entered into a three-year cross currency interest rate swap to receive U.S. dollars and pay Swiss francs. The notional principal is $10 million. The 3-year swap rates are quoted in the next table: Swiss Franc U.S. dollar Bid Ask Bid Ask 1.93% 2.01% 5.52% 5.59% Assume the current spot exchange rate is S = SF1.25/$. 2. Carlton, however, decided to unwind the swap after one year - thereby having two years left on the settlement costs of unwinding the swap after one year. Assume the current spot exchange rate when the swap is terminated one year later is S = SF1.23/$, and the Swiss interest rate is 2.00%, and US interest rate is 5.5% at that time. What is the present value of the U.S. dollar cash flows Carlton could have received if the swap contract were not terminated ? 3. 4. $8,675,333 $10,003,693 $10,164,575 $11,348,253 $12,341,631 1 points QUESTION 51 1. Continuation of the previous problem: Carlton Corporation entered into a three-year cross currency interest rate swap to receive U.S. dollars and pay Swiss francs. The notional principal is $10 million. The 3-year swap rates are quoted in the next table: Swiss Franc U.S. dollar Bid Ask Bid Ask 1.93% 2.01% 5.52% 5.59% Assume the current spot exchange rate is S = SF1.25/$. 2. In the above question where the currency swap contract was terminated after one year, what is the present value of the Swiss franc cash flows Carlton would have paid if the swap contract were not terminated? Assume again the current spot exchange rate when the swap is terminated one year later is S = SF1.23/$, and the Swiss interest rate is 2.00%, and US interest rate is 5.5% at that time. 3. SF8,675,333 SF10,003,693 SF11,257,251 SF12,502,427 SF12,787,585 1 points QUESTION 52 1. Continuation of the previous problem: Carlton Corporation entered into a three-year cross currency interest rate swap to receive U.S. dollars and pay Swiss francs. The notional principal is $10 million. The 3-year swap rates are quoted in the next table: Swiss Franc U.S. dollar Bid Ask Bid Ask 1.93% 2.01% 5.52% 5.59% Assume the current spot exchange rate is S = SF1.25/$. 2. In the above, what is the settlement payment Carlton has to make if the current exchange rate of S = SF1.23/$. 3. - $160,882 - $67,548 $128,248 $215,250 $253,250