Question 1
One major advantage of futures contracts over forwards is the
Answer
large number of currencies traded |
extensive delivery dates available |
freedom to liquidate the contract at any time before its maturity |
unlimited contract sizes |
1 points
Question 2
Suppose the current spot rate for the Canadian dollar is $0.9345. A call option with an exercise price of $0.9500 is said to be
Answer
in-the-money |
out-of-the-money |
at-the-money |
past breakeven |
1 points
Question 3
Suppose the current spot rate for the pound is $1.5150. A put option with an exercise price of $1.5200 is said to be
Answer
in-the-money |
out-of-the-money |
at-the-money |
past breakeven |
1 points
Question 4
Suppose the current spot rate for the Australian dollar is U.S.$1.0459. The intrinsic value of an A$50,000 call option with an exercise price of U.S.$1.0250 is
Answer
1 points
Question 5
Suppose you are holding a long position in a euro futures contract that matures in 76 days. The agreed-upon price is $1.25 per euro for 125,000 euro. At the close of trading today, the futures price has risen to $1.255. Under
marking to market, you now
Answer
hold a futures contract that has risen in value by $1,250 |
hold a futures contract that has fallen in value by $625 |
will receive $625 and effectively be given a new futures contract priced at $1.255 |
must pay $625 to the seller of the futures contract |
1 points
Question 6
Suppose that the interbank forward bid for March 20 on Swiss francs is $1.0612 at the same time that the price of IMM Swiss franc futures for delivery on March 20 is $1.0595. How much of an arbitrage profit could a dealer earn per March Swiss franc futures contract of SFr 125,000?
Answer
1 points
Question 7
You can speculate on a depreciation of the Japanese yen by
Answer
selling a yen put option or buying a yen call option. |
selling a yen put option or selling a yen call option. |
buying a yen put option or selling a yen call option. |
buying a yen put option or buying a yen call option. |
1 points
Question 8
A US Corporation has just made a French euro bid on a major project located in France. It won't find out for 60 days whether it has won the contract. There will be a 10% signing bonus payable to the winner in euros. The best way to protect against currency risk on its bid is for the US Corporation to
Answer
buy a euro futures contract. |
sell a euro call option. |
sell a euro futures contract. |
buy a euro put option. |
1 points
Question 9
A speculator in the futures market wishing to lock in a price at which they could ________ a foreign currency will ________ a futures contract.
Answer
buy; sell |
sell; buy |
sell;sell |
none of the above |
1 points
Question 10
Paula Simpson thinks that the U.K. pound will cost $1.55/£ in six months. A 6-month currency futures contract is available today at a rate of $1.44/£. If Paula was to speculate in the currency futures market, and her expectations are correct, which of the following strategies would earn her a profit?
Answer
Sell a pound currency futures contract. |
Buy a pound currency futures contract. |
Sell pounds today. |
Sell pounds in six months. |
1 points
Question 11
Jack Hemmings bought a 3-month British pound futures contract for $1.4400/£ only to see the dollar appreciate to a value of $1.4350/£ at which time he sold the pound futures. If each pound futures contract is for an amount of £62,500, how much money did Jack gain or lose from his speculation with pound futures?
Answer
$312.50 loss |
$312.50 gain |
£312.50 loss |
£312.50 gain |
1 points
Question 12
A foreign currency ________ option gives the holder the right to ________ a foreign currency whereas a foreign currency ________ option gives the holder the right to ________ an option.
Answer
call, buy, put, sell |
call, sell, put, buy |
put, hold, call, release |
none of the above |
1 points
Question 13
The main advantage(s) of over-the-counter foreign currency options over exchange traded options is (are)
Answer
expiration dates tailored to the needs of the client. |
amounts that are tailor made. |
client desired expiration dates. |
all of the above |
1 points
Question 14
As a general statement, it is safe to say that businesses generally use the ________ for foreign currency option contracts, and individuals and financial institutions typically use the ________.
Answer
exchange markets; over-the-counter |
over-the-counter; exchange markets |
private; government sponsored |
government sponsored; private |
1 points
Question 15
A call option on euros is written with a strike price of $1.35/euro. Which spot price maximizes your profit if you choose to exercise the option before maturity?
Answer
$1.30/euro |
$1.35/euro |
$1.40/euro |
$1.45/euro |
1 points
Question 16
Your U.S firm has an accounts receivable denominated in UK pounds due in 6 months. To protect yourself against unexpected changes in the dollar/pound exchange rate you should
Answer
buy a pound put option. |
sell a pound put option. |
buy a pound call option. |
sell a pound call option. |
1 points
Question 17
April 19, 2009, British Pound Option Prices (cents per pound, 62,500 pound contracts).
Note: Option&Underlying(Closing Price) and Strike Price are in 1/10 cents.
Given the table of data, what was the closing price of the British pound?
Answer
$1.448/£ |
£1.448/$ |
$14.48/£ |
None of the above |
1 points
Question 18
April 19, 2009, British Pound Option Prices (cents per pound, 62,500 pound contracts).
Note: Option&Underlying(Closing Price) and Strike Price are in 1/10 cents.
Given the table of data, the exercise price of ________ giving the purchaser the right to sell pounds in June has a cost per pound of ________ for a total price of ________.
Answer
1460; 0.68 cents; $425.00. |
1440; 1.06 cents; $662.50. |
1450; 1.02 cents; $637.50. |
1440; 1.42 cents; $887.50. |
1 points
Question 19
April 19, 2009, British Pound Option Prices (cents per pound, 62,500 pound contracts).
Note: Option&Underlying(Closing Price) and Strike Price are in 1/10 cents. Given the table of data,
the May call option on pounds with a strike price of 1440 has a price of ________.
Answer
$88/£ per contract. |
$0.88/£. |
$0.0088/£. |
none of the above |
1 points
Question 20
Dana Banateri works for the currency trading unit of ING Bank in London. She speculates that in the coming months the dollar will depreciate sharply vs. the pound. What should Dana do to act on her speculation?
Answer
Buy a call on the pound. |
Sell a call on the pound. |
Buy a put on the pound. |
Sell a put on the pound. |