UNIVERSITY OF WESTERN SYDNEY
School of Economics and Finance
200079 Derivatives
INTERIM TEST (KEY)
PARRAMATTA
Spring Session 2012
TIME ALLOWED: 1 hour
FORMAT: 20 multiple-choice questions
WEIGHTING OF EXAMINATION: 30%
SUBJECT CO-ORDINATOR: Dr. I. Nalson
SCIENTIFIC (NON-PROGRAMMABLE) CALCULATORS AND FOREIGN LANGUAGE
DICTIONARIES ARE PERMITTED
NAME: ____________________________________
STUDENT NUMBER:__________________________
TUTORIAL TIME ____________________________
Instructions to candidates:
THIS IS A CLOSED BOOK EXAMINATION
MULTIPLE-CHOICE QUESTIONS
NB: Indicate the answer you think is correct on the computerised sheet
1. The price
*…show more content…*

A. 8.24% B. 7.02 % C. 7.19%* D. None of the above $75er*4 = 100 er*4 = 100/75 er*4 = 1.33333333 Take logs of b.s. r4 = 0.28768207 r 0.28768207/4 r = 0.0719205 10. The current price of silver is $750. Storage costs are $8 per ounce per quarter payable in advance. The interest rate is 12% p.a. with continuous compounding. Calculate the futures price of silver for delivery in six months (to two decimal places). A: $721.44 B: $659.43 C: $813.12* D: None of the above F0 = (S0 + U)erT U = $8 + $8e-0.12*0.25 U = $8 + $7.763564265 F0 = ($750+ $15.76356427)e0.12*0.5 F0 = $813.1157286 = $813.12 11. A company has a $90 million portfolio with a beta of 1.5. The S & P index is currently standing at 3000. Futures contracts on $250 times the index can be traded. What trade is necessary to change the beta of the portfolio to one? A: Sell 60 contracts* B: Buy 75 contracts C: Sell 90 contracts D: None of the above If B > B* short (B-B*) P/A contracts (1.5 – 1)$(90,000,000/($250*3000) = 60 12. Using the data from the previous question, what trade is necessary to increase the beta of the portfolio to 1.8 from the original beta of 1.5 A: Sell 44 contracts B: Buy 56 contracts C: Buy 36 contracts* D: None of the above If B < B* long (B*- B) P/A contracts (1.8 – 1.5) ($90,000,000/($250*3000) = 36 13. The three-year zero rate is 6.45% and the four-year zero rate is 7.2%

Related

- Decent Essays
## Collinsville Case Study Essay

- 1184 Words
- 5 Pages

We are interested in obtaining the asset beta for Collinsville investment. Here from the reading material, we find there were altogether 6 chemical companies that produce sodium chlorates. They are Hooker, Pennwalt, American, Kerr-McGee, Brunswick and Southern. However, since we are evaluating the addition of a sodium chlorate plant, the two firms (Brunswick and Southern) who specialize in producing sodium chlorate are likely the best “twins”. To determine the asset betas of each company, we

- 1184 Words
- 5 Pages

Decent Essays - Decent Essays
## Ameritrade Case

- 789 Words
- 4 Pages

The table below shows the equity betas for the firms presented in the case (using Jan-92 to Dec-96 equal weight NYSE/AMEX/NASDAQ as market portfolio):

- 789 Words
- 4 Pages

Decent Essays - Satisfactory Essays
## Fin 410 Exam

- 1935 Words
- 8 Pages

1. You have a portfolio with a beta of 3.1. What will be the new portfolio beta if you keep 85 percent of your money in the old portfolio and 15 percent in a stock with a beta of 4.5?

- 1935 Words
- 8 Pages

Satisfactory Essays - Satisfactory Essays
## Spss Project

- 1058 Words
- 5 Pages

| | B | Std. Error | Beta | | | 1 | (Constant) | 1.858 | .078 | | 23.850 | .000 | | Need for Achievement | .521 | .021 | .580 | 24.455 | .000 | a.

- 1058 Words
- 5 Pages

Satisfactory Essays - Decent Essays
## Xacc/280 Week 1 Calculus Research Paper

- 523 Words
- 3 Pages

for the entirety of your math career, youve never calculated a moment’s slope. you only use approximations based on numbers before and after the current moment. That is, of course, until you hit calculus, when everything becomes instantaneous. In calculus, you derive equations to find how things are changing in the now; no need to focus on anything that came before or after. A tendency toward instantaneous moments occurred multiple times junior year.

- 523 Words
- 3 Pages

Decent Essays - Decent Essays
## Amu Math 302 Midterm

- 2158 Words
- 9 Pages

You have a choice of five appetizers, ten entrees, three beverages, and six desserts. How many possible complete dinners are possible? Place your answer, as a whole number—no decimal places—in the blank. For example 176 would be a legitimate entry 900

- 2158 Words
- 9 Pages

Decent Essays - Better Essays
## Target Corp. Weighted Average Cost of Capital

- 2253 Words
- 10 Pages

* Stock Beta: Exhibit 5 shows a detailed measurement of the company’s stock returns in relation to the rest of the market through 5-year historical price and index data. The analysis includes monthly returns of both the NYSE and the S&P 500 index in order to capture a comprehensive view of the market return. In each comparison, the monthly returns of the Target stock and market are plotted on Y-axis and X-axis respectively to get the regression line’s slope or beta. The analysis arrives at an average beta of 0.988 which indicates a similar movement of Target stock’s returns in comparison to the whole market over time.

- 2253 Words
- 10 Pages

Better Essays - Decent Essays
## Peachtree Securities Case Essay

- 924 Words
- 4 Pages

(See all the possible combinations on TABLE 2). 6. a) The portfolio’s risk would decrease if more stocks were.

- 924 Words
- 4 Pages

Decent Essays - Decent Essays
## Alex Sharpe's Portfolio Solution Essay

- 904 Words
- 4 Pages

The regression that we performed in excel for both stocks yielded a beta of .73576 for Reynolds, and a beta of 1.4198 for Hasbro. In question 2 we learned that although Reynolds stock was riskier independently, adding it to the portfolio made it more diversified compared to adding Hasbro, due to the fact that it was less correlated to the market portfolio. Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Therefore, since the beta of Reynolds is lower than Hasbro, our beta calculations align with the fact that Reynolds stock makes the overall portfolio less risky. This finding is also intuitive when considering the nature of the companies; Reynolds is a Tobacco company meaning that is should be less sensitive to changes in market conditions than a toy company like Hasbro.

- 904 Words
- 4 Pages

Decent Essays - Satisfactory Essays
## Stryker Corporation

- 1066 Words
- 5 Pages

5. Replace GE with Intel in your three asset portfolio. You can type over the GE ticker to

- 1066 Words
- 5 Pages

Satisfactory Essays - Satisfactory Essays
## Physics : Calculus Ia Section 2

- 771 Words
- 4 Pages

4. A particle moves along the x-axis with position at time t given by x (t) = e-t sin t for 0 ≤ t ≤ 2π.

- 771 Words
- 4 Pages

Satisfactory Essays - Decent Essays
## Calculus Midterm Analysis

- 320 Words
- 2 Pages

“If given an eggplant and tape, how do you find the volume of the eggplant?” This was the extra credit question for our Calculus Midterm. After reevaluating the Calculus problem, I started thinking of ways that approach this problem by relying on the skills that I have honed everyday, which allow me to express myself.

- 320 Words
- 2 Pages

Decent Essays - Satisfactory Essays
## Financial Bubble Essay

- 1927 Words
- 8 Pages

Try to work out this question by assuming that Beta’s position had been 99% of equity funds invested in the index fund, and 1% in a riskless money market account. Imagine that you can switch from the money market account to CREIT, BG, or the index fund. Think about the condition for Sarah to be indifferent between switching to CREIT (or BG) and switching to the index.

- 1927 Words
- 8 Pages

Satisfactory Essays - Decent Essays
## Pine Street Capital

- 1440 Words
- 6 Pages

If today PSC want to hedge out its 100 value of stock portfolio, assuming beta=1.67, alpha is 3.35%: next year 's value today initial value QQQ+10% QQQ-10% long portfolio 100 100*(1+3.35%+1.67*10%)=120.05 100*(1+3.35%1.67*10)=86.65 short QQQ 167 167*(1-10%)=150.3 167*(1+10%)=183.7 total 267 270.35 270.35 return on hedged portfolio 3.35% 3.35% the theoretical long portfolio value increase (portfolio return)=percentage increase in QQQ(QQQ return)*1.67+3.35%

- 1440 Words
- 6 Pages

Decent Essays - Decent Essays
## Midland Energy Resources

- 1412 Words
- 6 Pages

For this variable we take again the same risk free rate (4.66%) plus the equity market risk premium (5%) multiplied by the equity Beta of the E & P division (1.40). The beta we calculate with the comparables. The average equity beta in this industry is 1.15 and the average D/E ratio is 39.8%. With these information and the same formula as in question 3 we compute the asset beta

- 1412 Words
- 6 Pages

Decent Essays