Hull:Options,Futures,andOtherDerivatives,NinthEditionChapter5:DeterminationofForwardandFuturesPricesMultipleChoiceTestBank:Questions1.Whichofthefollowingisaconsumptionasset?A.TheS&P500indexB.TheCanadiandollarC.CopperD.IBMstock2.Aninvestorshorts100shareswhenthesharepriceis$50andclosesoutthepositionsixmonthslaterwhenthesharepriceis$43.Thesharespayadividendof$3pershareduringthesixmonths.Howmuchdoestheinvestorgain?A.$1,000B.$400C.$700D.$3003.Thespotpriceofaninvestmentassetthatprovidesnoincomeis$30andtherisk-freerateforallmaturities(withcontinuouscompounding)is10%.Whatisthethree-yearforwardprice?A.$40.50B.$22.22C.$33.00D.$33.164.Thespotpriceofaninvestmentassetis$30andtherisk-freerateforallmaturitiesis10%withcontinuouscompounding.Theassetprovidesanincomeof$2attheendofthefirstyearandattheendofthesecondyear.Whatisthethree-yearforwardprice?A.$19.67B.$35.84C.$45.15D.$40.505.Anexchangerateis0.7000andthesix-monthdomesticandforeignrisk-freeinterestratesare5%and7%(bothexpressedwithcontinuouscompounding).Whatisthesix-monthforwardrate?A.0.7070B.0.7177C.0.7249D.0.69306.Whichofthefollowingistrue?A.Theconvenienceyieldisalwayspositiveorzero.B.Theconvenienceyieldisalwayspositiveforaninvestmentasset.C.Theconvenienceyieldisalwaysnegativeforaconsumptionasset.D.Theconvenienceyieldmeasurestheaveragereturnearnedbyholdingfuturescontracts.7.Ashortforwardcontractthatwasnegotiatedsometimeagowillexpireinthreemonthsandhasadeliverypriceof$40.Thecurrentforwardpriceforthree-monthforwardcontractis$42.Thethreemonthrisk-freeinterestrate(withcontinuouscompounding)is8%.Whatisthevalueoftheshortforwardcontract?A.+$2.00B.−$2.00C.+$1.96D.−$1.968.Thespotpriceofanassetispositivelycorrelatedwiththemarket.Whichofthefollowingwouldyouexpecttobetrue?A.Theforwardpriceequalstheexpectedfuturespotprice.B.Theforwardpriceisgreaterthantheexpectedfuturespotprice.C.Theforwardpriceislessthantheexpectedfuturespotprice.D.Theforwardpriceissometimesgreaterandsometimeslessthantheexpectedfuturespotprice.9.Whichofthefollowingdes...
