Quiz
Chapter 5
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Questions in this quiz (15)
1KMW, Inc. plans to pay a dividend of $0.50 per share both 3 and 6 months from today. KMW's share price today is $36.00 and the continuously compounded quarterly interest rate is 1.5%. What is the price of a 6-month prepaid forward contract, which expires immediately after the second dividend?
- A$35.00
- B$35.02
- C$36.98
- D$37.00
2The S&P 500 Index is priced at $950.46. The annualized dividend yield on the index is 1.40%. What is the price of a 6-month prepaid forward contract on the S&P 500 Index?
- A$943.83
- B$950.00
- C$964.26
- D$984.21
3HAW, Inc. plans to pay a $1.10 dividend per share in 3 months and a $1.15 dividend in 6 months. HAW's share price today is $45.60 and the continuously compounded quarterly interest rate is 2.1%. What is the price of a forward contract, which expires immediately after the second dividend?
- A$45.28
- B$45.96
- C$45.60
- D$46.24
4The S&P 500 Index is priced at $950.46. The annualized dividend yield on the index is 1.40%. The continuously compounded annual interest rate is 8.40%. What is the price of a forward contract that expires 9 months from today?
- A$937.48
- B$942.66
- C$984.36
- D$1001.69
5Which of the following statements does NOT accurately reflect the relationship between securities and synthetic forward contracts?
- AForward = stock - zero coupon bond
- BZero coupon bond = stock - forward
- CPrepaid forward = forward - zero coupon bond
- DStock = forward + zero coupon bond
6The annualized dividend yield on the S&P 500 Index is 1.40%. The continuously compounded interest rate is 6.4%. If the 9-month forward price is $925.28 and the index is priced at $950.46, what is the profit/loss from a cash-and-carry strategy?
- A$25.18 loss
- B$25.18 gain
- C$61.50 loss
- D$61.50 gain
7The price of an S&P 500 Index futures contract is $988.26 when you decide to enter a long position. When the position is closed the futures price is $930.32. If there are no settlement requirements, what is your dollar gain or loss? (Ignore opportunity costs.)
- A$14,485 loss
- B$14,485 gain
- C$57.94 loss
- D$57.94 gain
8The price of an S&P 500 Index futures contract is $988.26 when you decide to enter a long position. When the position is closed the futures price is $930.32. If there are no settlement requirements, what is your percentage gain or loss under a 15.0% margin requirement? (Ignore opportunity costs.)
- A39% gain
- B39% loss
- C43% gain
- D43% loss
9Consider an investment in five S&P 500 Index futures contracts at a price of $924.80. The initial margin requirement is 15.0% and the maintenance margin is 10.0%. If the continuously compounded interest rate is 5.0% what will the futures price need to be for a margin call to occur 10 days from now? Assume no settlement within the 10 days.
- A$852.64
- B$872.79
- C$898.63
- D$905.25
10The S&P 500 Index price is $925.28 and its annualized dividend yield is 1.40%. LIBOR is 4.2%. How many futures contracts will you need to hedge a $25 million portfolio with a beta of 0.9 for one year?
- A105
- B120
- C80
- D95
11Interest rates on the U.S. dollar are 5.4% and euro rates are 4.6%. Given a dollar per euro spot rate of 0.918, what is the 6-month forward rate ($/E)?
- A 0.912
- B0.917
- C0.922
- D0.934
12Interest rates on the U.S. dollar are 6.5% and euro rates are 5.5%. The dollar per euro spot rate is 0.950. What is the arbitrage profit on a required 1 million euro payment if the forward rate is 0.980 dollars per euro and the exchange occurs in one year?
- A$10,000
- B$21,000
- C$28,000
- D $34,000
13An investor wants to hold 200 euro two years from today. The spot exchange rate is $1.31 per euro. If the euro denominated annual interest rate is 3.0% what is the price of a currency prepaid forward?
- A$200
- B$206
- C$231
- D$247
14The manager of a blue chip growth stock mutual fund is trying to fully hedge the $650 million portfolio position during the last two months of the calendar year. The current price of the S&P 500 Index futures contract is 1200. If the mutual fund has a beta of 1.24, how many contracts will be needed to hedge the fund?
- A1,083
- B3,033
- C242,963
- D541,666
15The current currency spot rate is $1.31 per euro. If dollar denominated interest rates are 3.0% and euro denominated interest rates are 4.0%, what is the likely dollar per euro exchange rate for a 2-year forward contract?
- A$1.28
- B$1.30
- C$1.31
- D$1.33
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- Quiz on Chapter 5, created by Beatriz Peregrina Viñolo on 29/11/2014.
- Author
- Beatriz Peregrina Viñolo
- Language
- Español
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