Question 11(5 points)

A 6-month $85 call option on a stock has an option premium of $.54. The 6-month, $85 put option has an option premium of $1.15. The risk-free rate is 2.5 percent. The options are European-style. What's the price of the stock?

Question 11 options:

A)

$84.28

B)

$83.35

C)

$82.89

D)

$82.54

Question 12(5 points)

The duration of a 3-month Treasury futures contract is 4.89 years. What is the duration of the underlying Treasury note?

Question 12 options:

A)

4.38 years

B)

5.24 years

C)

5.12 years

D)

4.64 years

Question 13(5 points)

Which one of the following statements istrueregarding futures contracts?

Question 13 options:

A)

Futures contracts generally grant the buyer the option to accept only a portion of the contract.

B)

Cost and convenience are the two key considerations when establishing the settlement procedures.

C)

The seller of a futures contract has the option to deliver cash in an amount equal to the contract value in lieu of the underlying asset.

D)

Futures prices are generally set equal to the spot price on the delivery date.

Question 14(5 points)

Which of the following is the minimum margin required in a futures account at all times?

Question 14 options:

A)

Maintenance margin

B)

Close-out margin

C)

Initial margin

D)

Starting margin

Question 15(5 points)

What's another term that could be used for implied standard deviation?

Question 15 options:

A)

Beta

B)

Implied volatility

C)

Covariance

D)

Alpha

Question 16(5 points)

Suppose you manage an $858 million bond portfolio with a duration of 7.32 years. You want to hedge the portfolio with Treasury note futures that have a duration of 7.68 years and a futures price of 114. U.S.

Treasury note futures contracts are based on a par value of $100,000 and quoted a percentage of par. How many contracts will you need to sell to complete- this hedge?

Question 16 options:

A)

7,174 contracts

B)

8,236 contracts

C)

9,391 contracts

D)

7,532 contracts

Question 17(5 points)

Which one of the following is a difference between a forward contract and a futures contract?

Question 17 options:

A)

Forward contracts are based on commodities while futures contracts are based on financial instruments.

B)

Futures contracts are managed through an organized exchange while forward contracts are not.

C)

The price of the asset exchanged is determined when a forward contract is entered while the price is set on the exchange date for a futures contract.

D)

A forward contract is a formal agreement while a futures contract is an informal agreement.

Question 18(5 points)

Suppose you purchase five corn futures contracts. The contract size is 5,000 bushels and the price is quoted in cents per bushel. Assume the initial margin requirement is 6.5 percent of the contract value.

What's the amount of the initial margin if the futures quote is 784?

Question 18 options:

A)

$13,348

B)

$13,186

C)

$12,740

D)

$12,980

Question 19(5 points)

Given a set of variables, the Black-Scholes option pricing formula has a put option delta of -.154. What is the call delta given these same variables?

Question 19 options:

A)

-.846

B)

-1.154

C)

.846

D)

1.154

Question 20(5 points)

How do call and put prices react to changes in sigma?

Question 20 options:

A)

Puts move more dramatically than calls

B)

Fairly similarly

C)

Neither puts nor calls react to changes in sigma

D)

Calls move more dramatically than puts