Futures And Options On Foreign Exchange

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Question 1
Free
True/False

A put option on $15,000 with a strike price of €10,000 is the same thing as a call option on €10,000 with a strike price of $15,000.

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True

False

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Question 2
Free
Multiple Choice

A CME contract on €125,000 with September delivery

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A

is an example of a forward contract.

B

is an example of a futures contract.

C

is an example of a put option.

D

is an example of a call option.

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Question 3
Free
Multiple Choice

Yesterday,you entered into a futures contract to buy €62,500 at $1.50 per €.Suppose the futures price closes today at $1.46.How much have you made/lost?

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A

Depends on your margin balance.

B

You have made $2,500.00.

C

You have lost $2,500.00.

D

You have neither made nor lost money, yet.

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Question 4
Free
Multiple Choice

In reference to the futures market,a "speculator"

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A

attempts to profit from a change in the futures price

B

wants to avoid price variation by locking in a purchase price of the underlying asset through a long position in the futures contract or a sales price through a short position in the futures contract

C

stands ready to buy or sell contracts in unlimited quantity

D

both b) and c)

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Question 5
Free
Multiple Choice

Comparing "forward" and "futures" exchange contracts,we can say that

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A

they are both "marked-to-market" daily.

B

their major difference is in the way the underlying asset is priced for future purchase or sale: futures settle daily and forwards settle at maturity.

C

a futures contract is negotiated by open outcry between floor brokers or traders and is traded on organized exchanges, while forward contract is tailor-made by an international bank for its clients and is traded OTC.

D

both b) and c)

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Question 6
Multiple Choice

Comparing "forward" and "futures" exchange contracts,we can say that

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A
delivery of the underlying asset is seldom made in futures contracts.
B
delivery of the underlying asset is usually made in forward contracts.
C
delivery of the underlying asset is seldom made in either contract-they are typically cash settled at maturity.
D
both a) and b)
E
both a) and c)
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Question 7
Multiple Choice

In which market does a clearinghouse serve as a third party to all transactions?

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A
Futures
B
Forwards
C
Swaps
D
None of the above
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Question 8
Multiple Choice

In the event of a default on one side of a futures trade,

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A
the clearing member stands in for the defaulting party.
B
the clearing member will seek restitution for the defaulting party.
C
if the default is on the short side, a randomly selected long contract will not get paid.That party will then have standing to initiate a civil suit against the defaulting short.
D
both a) and b)
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Question 9
Multiple Choice

Yesterday,you entered into a futures contract to buy €62,500 at $1.50 per €.Your initial performance bond is $1,500 and your maintenance level is $500.At what settle price will you get a demand for additional funds to be posted?

Choose correct answer/s
A
$1.5160 per €.
B
$1.208 per €.
C
$1.1920 per €.
D
$1.4840 per €.
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Question 10
Multiple Choice

Yesterday,you entered into a futures contract to sell €62,500 at $1.50 per €.Your initial performance bond is $1,500 and your maintenance level is $500.At what settle price will you get a demand for additional funds to be posted?

Choose correct answer/s
A
$1.5160 per €.
B
$1.208 per €.
C
$1.1920 per €.
D
$1.1840 per €.
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Question 11
Multiple Choice

Yesterday,you entered into a futures contract to buy €62,500 at $1.50/€.Your initial margin was $3,750 (= 0.04 €62,500 $1.50/€ = 4 percent of the contract value in dollars).Your maintenance margin is $2,000 (meaning that your broker leaves you alone until your account balance falls to $2,000).At what settle price (use 4 decimal places)do you get a margin call?

Choose correct answer/s
A
$1.4720/€
B
$1.5280/€
C
$1.500/€
D
None of the above
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Question 12
Multiple Choice

Three days ago,you entered into a futures contract to sell €62,500 at $1.50 per €.Over the past three days the contract has settled at $1.50,$1.52,and $1.54.How much have you made or lost?

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A
Lost $0.04 per € or $2,500
B
Made $0.04 per € or $2,500
C
Lost $0.06 per € or $3,750
D
None of the above
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Question 13
Multiple Choice

Today's settlement price on a Chicago Mercantile Exchange (CME)Yen futures contract is $0.8011/¥100.Your margin account currently has a balance of $2,000.The next three days' settlement prices are $0.8057/¥100,$0.7996/¥100,and $0.7985/¥100.(The contractual size of one CME Yen contract is ¥12,500,000).If you have a short position in one futures contract,the changes in the margin account from daily marking-to-market will result in the balance of the margin account after the third day to be

Choose correct answer/s
A
$1,425.
B
$2,000.
C
$2,325.
D
$3,425.
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Question 14
Multiple Choice

Today's settlement price on a Chicago Mercantile Exchange (CME)Yen futures contract is $0.8011/¥100.Your margin account currently has a balance of $2,000.The next three days' settlement prices are $0.8057/¥100,$0.7996/¥100,and $0.7985/¥100.(The contractual size of one CME Yen contract is ¥12,500,000).If you have a long position in one futures contract,the changes in the margin account from daily marking-to-market,will result in the balance of the margin account after the third day to be

Choose correct answer/s
A
$1,425.
B
$1,675.
C
$2,000.
D
$3,425.
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Question 15
Multiple Choice

Suppose the futures price is below the price predicted by IRP.What steps would assure an arbitrage profit?

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A
Go short in the spot market, go long in the futures contract.
B
Go long in the spot market, go short in the futures contract.
C
Go short in the spot market, go short in the futures contract.
D
Go long in the spot market, go long in the futures contract.
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Question 16
Multiple Choice

What paradigm is used to define the futures price?

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A
IRP
B
Hedge Ratio
C
Black Scholes
D
Risk Neutral Valuation
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Question 17
Multiple Choice

Suppose you observe the following 1-year interest rates,spot exchange rates and futures prices.Futures contracts are available on €10,000.How much risk-free arbitrage profit could you make on 1 contract at maturity from this mispricing? image

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A
$159.22
B
$153.10
C
$439.42
D
None of the above
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Question 18
Multiple Choice

Which equation is used to define the futures price?

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A
image
B
image
C
image
D
image
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Question 19
Multiple Choice

Which equation is used to define the futures price?

Choose correct answer/s
A
image
B
image
C
image
D
image
E
image
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Question 20
Multiple Choice

If a currency futures contract (direct quote)is priced below the price implied by Interest Rate Parity (IRP),arbitrageurs could take advantage of the mispricing by simultaneously

Choose correct answer/s
A
going short in the futures contract, borrowing in the domestic currency, and going long in the foreign currency in the spot market.
B
going short in the futures contract, lending in the domestic currency, and going long in the foreign currency in the spot market.
C
going long in the futures contract, borrowing in the domestic currency, and going short in the foreign currency in the spot market.
D
going long in the futures contract, borrowing in the foreign currency, and going long in the domestic currency, investing the proceeds at the local rate of interest.
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