Description
its about multiple choice questions and 2 essay questions, the multiple choice questions i just want you to pick the right answer ( A , b,c or d) wothout a long explanation, for the essay questions required (250-300) the other essay question is math question.. Please make sure that your answers are correct
Unformatted Attachment Preview
The difference in profit from an actual put and a synthetic put is:
A• ST -X
B• ST + X1 + r)-T
C• X – ST
D•none of the above
Explain each of the following concepts as they relate to call options.
a. Delta
b. Gamma
c. Rho
d. Vega
A contango market is consistent with:
A•a positive cost of carry
B•futures prices exceeding spot prices
C• a negative basis
D• all of the above
The binomial price will theoretically equal the Black-Scholes-Merton price under
which of the following conditions?
A• when the option is in-the-money
B•when the number of time periods is larg
C•when the option is at-the-money
D•when the option is out-of-the-money
Find the forward rate of foreign currency Y if the spot rate is $4.50, the domestic
interest rate is 6 percent, the foreign interest rate is 7 percent, and the forward
contract is for nine months.
A• $4.458
B•$4.468
C• $5.104
D• $4.532
The Black-Scholes-Merton model for European puts, obtained by applying put-call
parity to the Black-Scholes-Merton model for European calls expressed by which of
the
following:
P= Xe -rc T N(-d,) -S,N(-d1)
P= Xe *TN(-d,) – S,N(-d,)
P= X1+r)-*N(-d,) -S N(-d,)
P= XI+r)”N(-d,) -S,N(-d,)
If a firm is planning to borrow money in the future, the rate it is trying to lock in is:
A•the current spot rate
B• the current forward rate
C• the difference between the spot rate and the forward rate
D• The forward rate at the termination of the hedge
A covered call writer who prefers even less risk should :
A• switch to a call with a higher exercise price
B• get rid of the call
C• get rid of the stock
D• switch to a call with a lower exercise price
The pattern of volatility across exercise prices is often called:
A• the term structure of implied volatility
B• the skew
C• the price-fluctuation graph
D• the volatility smile
–
Suppose you observe the spot euro at $1.33/€ and the three month euro futures at
$1.379/€. Based on carry arbitrage, you conclude
A• this futures market is inefficient because the futures price is below the spot price
B• the risk-free rate in Europe is higher than the risk-free rate in the U. S
C• this futures market is indicating that the spot price i s expected to fall
D• the spot price is too high relative to the observed futures price
_
Determine the appropriate price of a European put on a futures if the call is worth
$6.55, the continuously compounded risk-free rate is 5.6 percent,
the exercise price is $75, and the expiration is in three months.
A• 11.48
B• 50.54
C• $1.62
D•$12.56
Assume that there is a forward market for a commodity. The forward price of the
commodity is $120. The contract expires in one year. The risk-free rate is 10
percent. Now, six months later, the spot price is $140. What is the forward contract
worth(Value) at this time?
(250-300) word
Purchase answer to see full
attachment
