Question : 23.Suppose Snooty Wine Importers has an order of Chateau de : 1325829

 

 

23.Suppose Snooty Wine Importers has an order of Chateau de Snoot wines arriving from France in October, and the order will be paid in euros. If Snooty enters a contract today with a forward rate of 0.9 euros per U.S. dollar for October delivery, and the spot rate in October turns out to be euro 0.85 per U.S. dollar, what is the effect of the forward contract on Snooty?

a.Snooty Importers made $37,500

b.Snooty Importers lost $37,500

c.Snooty Importers made $637,55

d.There is no effect.

 

 

 

24.Suppose the spot price of oil is $49.50 per barrel, while the October futures price is $51.00 per barrel. For this contract, the basis is

a.$51.00

b.$49.50

c.$1.50

d.$100.50

 

 

 

25.Today, the price of an October oil futures contract closed at $49.50 per barrel. Yesterday, the contract closed at $50.25. When margin accounts are marked to market,

a.long positions will have $0.75 per barrel added.

b.long positions will have $0.75 per barrel deducted.

c.short positions will have $0.75 per barrel deducted.

d.no changes are made until the October expiration.

 

 

 

26.The process of identifying firm-specific risk exposures and managing those exposures is called

a.capital management

b.risk management

c.financial management

d.none of the above

 

 

 

27.The overall impact of foreign exchange rate fluctuations on a firm’s value is called

a.interest rate risk

b.transaction exposure

c.economic exposures

d.none of the above

 

 

 

28.The average price at which a futures contract sell at the end of the trading day is called the

a.opening price

b.closing price

c.settlement price

d.lifetime price

 

 

 

29.The minimum dollar amount required by an investor when taking a position in a futures contract is called the

a.initial margin

b.maintenance margin

c.margin account

d.none of the above

 

 

 

30.A call option on interest rates is called an

a.interest rate collar

b.interest rate floor

c.interest rate cap

d.interest rate swap

 

 

 

31.You plan to buy a 2 year zero coupon bond one year from today. If the risk free rate is 5.6% and a three year zero-coupon bond currently sells for $843.25, what should be the forward price?

a.$890.47

b.$943.25

c.$925.89

d.$1045.72

 

 

 

32.You plan to buy a 2 year zero coupon bond one year from today. If the risk free rate is 5.6% and the forward price for the bond is $843.25, what should be the current price of a three year zero-coupon bond?

a.$943.25

b.$893.23

c.$996.07

d.$798.53

 

 

 

33.If the current spot exchange rate on the Euro is $1.2812/€ and the one year risk free rate for borrowing in dollars is 3% and 4% for borrowing in Euros, what should be the one year $/€ forward exchange rate?

a.1.2812

b.1.2689

c.1.2936

d.1.2469

 

 

 

34.If the current spot exchange rate on the Euro is €0.7805/$ and the one year risk free rate for borrowing in dollars is 3% and 4% for borrowing in Euros, what should be the one year $/€ forward exchange rate?

a.1.2689

b.0.7881

c.1.2936

d.0.7730

 

 

 

35.If the current spot exchange rate on the Euro is $1.2812/€ and the two year risk free rate for borrowing in dollars is 3% and 4% for borrowing in Euros, what should be the two year $/€ forward exchange rate?

a.1.2689

b.1.2812

c.1.2567

d.1.2469