Question :
90. The seller of a pork bellies futures contract at $0.41 : 1284489
90. The seller of a pork bellies futures contract at $0.41 per pound noted that the closing price of pork bellies was $0.44 today. What will happen to this contract, which requires delivery of 40,000 of pork bellies at expiration?
A. A loss of $400 is posted to the account.
B. A gain of $400 is posted to the account.
C. A loss of $1,200 is posted to the account.
D. A gain of $1,200 is posted to the account.
91. The seller of a copper futures contract noticed that his account was marked with a $500 gain yesterday. If the standardized contract requires delivery of 25,000 pounds of copper, what happened that day to the price of copper?
A. The price closed down $0.02 per pound.
B. The price closed up $0.02 per pound.
C. The price closed down $0.20 per pound.
D. The price closed up $0.20 per pound.
92. General Mills bought September call options for wheat with an exercise price of $2.80 at a price of $0.10 per bushel. If the price of wheat at the expiration is $2.90, what is the net cost of one bushel of wheat for General Mills?
A. $2.70
B. $2.80
C. $2.90
D. $3.00
93. A farmer hedged his risk by buying put options on wheat with an exercise price of $2.70 at a price of $0.14 per bushel. If the price of wheat at the expiration of the contract is $2.70, what is the net revenue from each bushel of wheat?
A. $2.56
B. $2.63
C. $2.70
D. $2.84
94. A copper producer is worried about the copper prices going down. The risk of downward movement in prices can be hedged by:
A. buying call options on copper.
B. selling copper futures.
C. buying copper futures.
D. selling copper call options.
95. A miller can hedge the price risk on wheat by:
A. buying put options on wheat.
B. selling call options on wheat.
C. buying wheat futures.
D. selling wheat futures.
96. Which of the following is a major reason for firms to engage in currency swaps?
A. They will be required to repay only the interest.
B. They can obtain more favorable borrowing terms in a different currency.
C. The debt will not show on their balance sheets.
D. Borrowing in a foreign currency offers lucrative tax breaks.
97. When two borrowers engage in a currency swap, they agree to:
A. trade one currency for another, thus avoiding the foreign exchange market.
B. make payments on each other’s borrowings in a different currency.
C. pay to each other any depreciation or appreciation of the currency.
D. exchange fixed-rate interest payments for variable-rate interest payments.
98. ABC Corp. entered into a currency swap with its bank, providing that ABC borrows $5 million at 10% and swaps for a 12% yen loan. The spot exchange rate is ?105/$. If interest only is to be repaid on an annual basis, how much does ABC pay annually to the bank?
A. ?1.26 million
B. ?5.71 million
C. ?52.50 million
D. ?63.00 million
99. Nestlé wishes to obtain a loan denominated in Swiss francs but considers the U.S. market to offer better terms. How can Nestlé accomplish this?
A. Borrow francs in Switzerland, exchange for dollars, and arrange a currency swap.
B. Borrow francs in Switzerland, exchange for dollars, and arrange an interest rate swap.
C. Borrow dollars in the United States, exchange for francs, and arrange an interest rate swap.
D. Borrow dollars in the United States, exchange for francs, and arrange a currency swap.
100. Currency swaps are used to:
A. lock in an exchange rate for future delivery of a foreign currency.
B. effectively transform loans originated in one currency to a different currency.
C. transform fixed-rate loans into variable-rate loans.
D. exchange foreign currencies in amounts not possible in the foreign exchange market.
101. Interest rate swaps allow both counterparties to:
A. reduce interest expenses.
B. avoid repayment of the notional principal.
C. rearrange the balance sheet.
D. pay a floating rate of interest on their debt.
