Multinational Financial Management by Alan Shapiro: Currency Futures and Options Markets

1250 WordsOct 4, 20155 Pages
CHAPTER 8 Currency Futures and Options Markets EASY (definitional) 8.1 Which one of the following currency futures contracts is currently NOT available? a) French franc b) Hungarian forint c) Czech koruna d) Norwegian krone Ans: a Section: Futures contracts Level: Easy 8.2 Which of the following has provided a major inducement for speculators to participate in the futures market? a) low margin requirements b) low bid‑ask spreads c) high volume compared to the forward market d) all of the above Ans: a Section: Forward contracts versus futures contracts Level: Easy 8.3 Options traded in the interbank market are known as a) listed options b) exchange‑traded options c) over‑the‑counter options d) long-term…show more content…
How much of an arbitrage profit could a dealer earn per March Swiss franc futures contract of SFr 125,000? a) $400 b) $68 c) $215 d) $58 Ans: a Section: Arbitrage between the futures and forward markets Level: Difficult 8.14 Suppose it is May 1998 and the current spot rate for the DM is $0.5925. The call premium on a call option with an exercise price of $0.5675 is $0.0373. What is the time value of one DM 62,500 call option? a) $2,331.25 b) $1,562.50 c) $950.00 d) $768.75 Ans: d Section: Option pricing and valuation Level: Difficult 8.15 Suppose it is January 1990 and the current spot rate for the DM is $0.5925. The call premium on a call option with an exercise price of $0.5675 is $0.0373. What is the intrinsic value of one DM 62,500 call option? a) $2,331.25 b) $1,562.50 c) $950.00 d) $768.75 Ans: b Section: Option pricing and valuation Level: Difficult 8.16 The value of a European option always a) exceeds its intrinsic value b) rises with the time to maturity c) rises with the interest rate d) rises with the volatility of the exchange rate Ans: d Section: Option pricing and valuation Level: Difficult 8.17 A rise in the domestic interest rate will a) raise the value of foreign‑currency call options

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