Exam 11: Forwards,futures,and Swaps

Marie has done some research and found that the spot rate is C$1.4039 per euro.Her neighbour told her that the three-month forward rate is C$1.44 per euro.If Marie assumes a 1,000 euro long position in the forward contract,what will her profit (loss)be if the spot rate in 3 months is C$1.45 per euro?

Assume perfect foresight.The current spot rate is C$2.037 per British pound.The 3-month forward rate is C$2.0383.The spot rate in three months will be C$2.04 per pound.What position must an investor assume in order to make a profit of $17.00?

An investor enters a short position worth $10,000 in futures contracts that require a maintenance margin that is 50% of this amount.The spot price of the underlying asset closes at the following prices for the next five days: $20.50,$20.75,$21.00,$20.75 and $20.00,and the current spot is $21.00.On what days will the investor receive a margin call and why? (Assume no deposits or withdrawals.)

Xin is selling his transformer over the internet for C$500.An interested buyer says he is willing to pay 360 euro in six months.What position should Xin take to eliminate his foreign exchange exposure?

Profit from a long position in a forward is:

Which of the following carries storage costs?

Matthew enters into an FRA with the local bank.The current one year forward rate is 4%.If the yield on a one year T-Bill in one year is 3.5%,what payment will be made to settle the agreement?

Ronald's company enters a 3-year,$10,000 plain vanilla interest rate swap and agrees to pay LIBOR and receive a fixed rate of 5%.Payments are to be exchanged every six months.Determine the semi-annual payments that Ronald must receive,assuming LIBOR has the following values for each six-month period beginning now: 5%,5.5%,6%,4.75%,4.25%,4%.

When does counterparty risk arise?

Credit default swap is classified as:

Nanci enters into a long position in 6,000 futures contracts that require a $6,000 initial margin and has a maintenance margin that is 75% of this amount.The futures price associated with this contract is $10.Assume that the spot price of the underlying asset closes at the following prices for the next five days: $10.50,$10.75,$11.00,$9.75 and $9.25.Estimate the daily profit (loss)for Nanci as well as her equity position.(Assume no cash deposits or withdrawals are made from the account.)

Use the following statements to answer this question:

Estimate the year 1 forward rate given: 2 year zero will earn 3% 1 year zero will earn 2.5%

Company JH enters a swap to pay a fixed rate of 12% and the counterparty MI will pay a floating rate of LIBOR + 0.3%.What are the net payments (in %)from JH's point of view given that LIBOR for the next five periods equals: 8.0,9.0,11.0,12.0,12.3

Wheat is selling for $25 spot.Storage costs are $2 for the year,and financing costs are 5% per year.What is the forward price for a one-year forward contract for wheat?

Forward contracts can be used either to hedge or to speculate.These actions:

Interest rate swaps allow one party to exchange:

What condition is necessary to create a synthetic forward contract?

Which of the following are classified as commodities for the purpose of futures contracts?

Which is a graph of a short position in a forward contract?