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ricardo v.

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Oluwadamilola Ameobi verified

Numerade educator

the following are continuously compounded annual spot interest rate: 1 year rate 2%, 2 years rate 3%, 3 years rate 4%, 4 years rate 5% and 5 years rate 6%.You are given the following casf flow : in 2 years -time €1,101, in 5 years -time €4000.What is tzhe present value of this casf flow

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Crystal Wang verified

Numerade educator

the trader sells the right but not obligation , to buy an asset from himself is taking is a short position in call option ?

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INSTANT ANSWER

A stock price is currently S = 100. Over the next year, it is expected to go up by 100% (u = 2) or down by 50% (d = 0.50). The risk-free interest rate is r = 20% per annum with continuous compounding. What is the value of a 12-month European Put option with a strike price K = 100? Select one: a. €22.50 b. €26.25 c. €21.25 d. €25.00 e. €23.75

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Aparna Shakti verified

Numerade educator

The feature that a portfolio made of a call option on a non-dividend paying stock and the stock itself in adequate proportions can replicate the behaviour of a European put option is known as: Select one: a. The Non-Dividend- Stock parity. b. The Put-Call parity. c. The Covered Interest Rate (CIR) parity. d. The Portfolio Replication property. e. The Put Replication parity.

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Aparna Shakti verified

Numerade educator

A European-based company knows that it is due to pay a certain amount of US dollars in three months' time. Which of the following derivative contracts is appropriate for hedging against the foreign exchange risk? (EURUSD FX represents the amounts of US dollars per unit of Euro. If you buy EURUSD, you are buying Euros and selling USD). Select one: a. A long position on a EURUSD 3-month Put option. b. A short position on a 3-month Forward Rate Agreement. c. A long position on a EURUSD 3-month Forward contract. d. A long position on a EURUSD 3-month Call option.

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Aparna Shakti verified

Numerade educator

The strategy that aims to reduce (hedge) the impact of changes in the option's price by adjusting the position on the option's underlying stock is known as: Select one: a. The Black-Scholes strategy b. The Risk-Neutral portfolio strategy. c. The Risk-Reduction strategy. d. The Offsetting-option strategy. e. The Delta-hedging strategy

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Aishwarya Krishnakumar verified

Numerade educator

A stock price is currently S = 100. Over the next year, it is expected to go up by 100% (u = 2) or down by 50% (d = 0.50). The risk-free interest rate is r = 20% per annum with continuous compounding. What is the value of a 12-month European Put option with a strike price K = 100? Select one: a. €22.50 b. €26.25 c. €21.25 d. €25.00 e. €23.75

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ANSWERED

Aparna Shakti verified

Numerade educator

Companies A and B want to borrow €10 million each (they want to issue debt) for 3 years. The market offers them the following alternatives (Symbol for floating rate: L). Company A) Floating rate: L + 1.5%, Fix rate: 2.0%. Company B) Floating rate: L + 3.0%, Fix rate: 5.0%. A financial institution arranges a swap and charges 50 basis points (0.5%) per year. If the swap is organized so that it is equally attractive to both companies: What is the net rate of interest that will end up paying company A? Select one: a. 2.5% b. L + 1.5% c. L + 1.0% d. 1.5% e. 2.0% f. L + 0.5%

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Aparna Shakti verified

Numerade educator

The following are continuously compounded annual spot interest rates: 1 year rate: 3%, 2 years rate: 6%, 3 years rate: 8.5%, 4 years rate: 10.5% and 5 years rate: 12.0%. You are given the following cash flow: In 1 year-time: €50, in 3 years-time: €60 and in 5 years-time: €100. What is the present value of this cash flow? Select one: a. 90 b. 180 c. 210 d. 120 e. 150

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Aparna Shakti verified

Numerade educator

A trader enters into a short cotton futures contract when the futures price is 50 cents per pound. The contract is for the delivery of 50,000 pounds. How much does the trader gain or lose if the cotton price at the end of the contract is 48.20 cents per pound? Select one: a. It loses EUR 900 b. It earns EUR 1800 c. It earns EUR 900

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