Exam 23: Risk Management: An Introduction to Financial Engineering

Browning Enterprises currently has all fixed-rate debt. The firm would like to convert part of this to floating-rate debt. Which one of the following will accomplish this for the firm?

Futures contracts:

A strong argument can be made that the collapse of the U.S. savings and loan industry began when:

Suppose you purchase a September cocoa futures contract at the last price of the day as shown in the table below. What will be your profit or loss on this contract if the price turns out to be $1,707 per metric ton at expiration? Futures: Cocoa - 10 metric tons, $ per ton

Which one of the following actions will provide you with the right, but not the obligation, to sell the underlying asset at a specified price during a specified period of time?

By hedging financial risk, a firm can:

A swap dealer in the U.S.:

Which one of the following statements concerning option payoffs is correct?

You are the purchasing agent for a major cookie company. You anticipate that your firm will need 20,000 bushels of oats in December. You decide to hedge your position today and did so at the closing price of the day. Assume that the actual market price turns out to be 228.0 on the day you actually buy the oats. How much did you gain or lose by hedging your position? Oats - 5,000 bu.: Cents per bu.

You decided to speculate in the market and sold 8 gold futures contracts when the futures price was $867.50 per ounce. The price on the contract maturity date was $730.40. What was your total profit or loss if the contract size was 100 ounces?

Given the following information, what is the price per troy ounce that will be used for today's marking-to-market for the December silver contract? Silver - 5,000 troy oz.: Dollars and cents per troy oz.