Suppose that a party wanted to enter an FRA that expires in 121 days and is based on 76-day LIBOR. The dealer quotes a rate of 0.043 on the FRA.  Assume that at expiration, the 76-day LIBOR is 0.042, and the notional amount is USD10,000,000. What is the payoff of the FRA short position?

2. A US-based exporter anticipated receiving 100 million EURO in six months, and took a long forward position, locking-in an exchange rate of $1.5/EURO. If six months later at maturity, the exporter calculates that she has made a profit of $28 million from the currency forward contract, the spot exchange rate at maturity must be USD/EURO .

 

3. A put option with an exercise price of $58 will expire in 180 days. The underlying asset price of today is $182 . The underlying asset price at expiration is $186. The risk-free rate is 2%.

What is the lower bounds for an European put?

 

4. A portfolio manager entered a swap with a dealer. The swap's notional principal is $100, payments are to be made semi-annually, and the swap allows netting of payments. The dealer agrees to pay a fixed annual rate of 4%, while the asset manager agrees to pay the return on SP500 index. The SP500 index at the initiation is 200. If SP500 six months later becomes 180, how much would be the payment from the dealer to the asset manager should be after cash settlement?

Note: You should use a positive number to represents the amount the dealer pays to the manager.  You should use a negative number represents the amount that the dealer receives from the manager.

 

5. An option with an exercise price of $190 will expire in 180 days. The underlying asset price of today is $238 . The underlying asset price at expiration is $259. The risk-free rate is 2%, 

What is the lower bounds for an American call?

 

6. Suppose we enter into a 65-day T-bill futures contract quoted at 0.032. The notional amount is $1,000. What is the actual price?

 

7. For a FRA, we call it 4 × 7 FRA, that should be an FRA that uses HOW MANY days LIBOR and expires in 120 days from now? Assuming 30 days in a month.

 

8. Suppose a put option has X=137 and Premium=9. As a seller of the put, what is the minimum profit?