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1INTERNATIONALFINANCEAssignmentProblems(6)Name:Student#:I.Choosethecorrectanswerforthefollowingquestions(onlyONEcorrectanswer)(3creditsforeachquestion,totalcredits3x20=60)1.WhichofthefollowingisNOTtrueregardingforwardcontracts?A.Thematurityofforwardcontractsisflexible.B.ForwardcontractsaretradedbothonorganizedexchangesandOTCmarket.C.Forwardcontractsareusedtospeculatethediscrepanciesoftheexchangerates.D.Thesizeofaforwardcontractisusuallymuchlargerthanthatofthefuturesoroptions.2.WhichofthefollowingisNOTacontractspecificationforcurrencyfuturestradingonanorganizedexchange?A.maturitydateB.maintenancemarginrequirementC.sizeofthecontractD.Alloftheabovearespecified3.Afuturescontractisverysimilartoaforwardcontract,because__________.A.bothareagreementsbetweentwopartiestodeliverrelativecurrenciesatacertaintimeforacertainpriceB.botharestandardizedcontractsC.bothcanbeusedtoeliminatethedefaultriskD.botharerequiredtophysicallydelivertheunderlyingcurrency4.Iftheamountinthemarginaccountdropsbelowthemaintenancemargin,thefuturescontractholderwill__________.A.closeoutthecontractB.beissuedamargincallC.writeanewcontractD.notifytheexchange5.WhichofthefollowingisNOTadifferencebetweenacurrencyfuturescontractandaforwardcontract?A.Thecounterpartytothefuturesparticipantisunknownwiththeclearinghousesteppingintoeachtransactionwhereastheforwardcontractparticipantsareindirectcontactsettingtheforwardspecifications.B.Asinglesalescommissioncoversboththepurchaseandsaleofafuturescontractwhereasthereisnospecificsalescommissionwithaforwardcontractbecausebanksearnaprofitthroughthebid-askspread.C.Thefuturescontractismarkedtomarketdailywhereasaforwardcontractisonlyduetobesettledatmaturity.D.Alloftheabovearedifferencesbetweenacurrencyfuturescontractandaforwardcontract.26.AssumethatCitibankinNewYorkquotesa30-dayforwardrateoneuroof$0.7533whiletheSingaporeInternationalMonetaryExchange(SIMEX)eurofuturesfordeliveryin30daysisbeingquotedat$0.7522.Youcanmakearisklessprofitby__________.A.takingashortpositiononeuroinSIMEXeurofuturescontractandalongpositiononeurointheforwardcontractB.takingalongpositiononeuroinSIMEXeurofuturescontractandashortpositiononeurointheforwardcontractC.takingashortpositionondollarinSIMEXeurofuturescontractandashortpositionondollarintheforwardcontractD.takingalongpositionondollarinSIMEXeurofuturescontractandalongpositionondollarintheforwardcontract7.Themainfunctionofthe“Markingtomarket”procedurecomesdownto__________.A.avoiddefaultriskinherentinforwardcontractsB.coverriskexposurearisenfromtheinternationaltransactionsC.protectthecontractholdersfromsufferingthelossD.alloftheabove8.Thebuyerofafuturescontractisrequiredtoputasumofmoneyintheexchange.Thissumofmoneyiscalled__________.A.downpaymentB.initialmarginC.premiumD.commission9.Whenreadingthefuturesquotationinthenewspaper,thecolumnheadingindicatingthenumberofcontractsoutstandingonthepreviousdayiscalled__________.A.percentagechangeB.settleC.openinterestD.estimatedvolume10.AputoptiononJapaneseyeniswrittenwithastrikepriceof¥88/$.Whichofthefollowingspotratemaximizesyourprofitifyouchoosetoexecutethecontractbeforematurity?A.¥70/$B.¥80/$C.¥90/$D.¥100/$11.Theagreedpriceinacurrencyoptioncontractiscalledthe__________.A.forwardpriceB.futurespriceC.exercisepriceD.spotprice312.Foracurrencyputoptionifthefuturespotrateisabovethestrikeprice,theoptionissaidtobe__________.A.in-the-moneyB.at-the-moneyC.out-of-the-moneyD.break-even13.Thewriterofanoptioncontracthas__________whereastheholderhas__________.A.obligation;choiceB.right;responsibilityC.choice;obligationD.priority;privilege14.Assumeyouboughtacalloptionwiththeexercisepriceof$1.55/₤inChicagoMercantileExchangeonSeptember6.ThecontractwouldbeexpiredinDecember.Ifthespotexchangeratewas$1.50/₤onOctober10,theintrinsicvalueofthiscalloptiononthatdaywouldbe__________.A.$0.05B.-$0.05C.$0D.Noneoftheabove,becausethecontractdoesn’texpireonOctober10.15.Theforeign-currencyaccountspayablecanbehedgedbybuyinga__________optionontheforeigncurrency,whereasaccountsreceivablecanbehedgedbybuyinga__________optionontheforeigncurrency.A.call;putB.put;callC.American;EuropeanD.European;American16.Mr.Bulltriestospeculateonthedirectionoftheentirestockmarket,themostefficientmethodheshoulduseistoacquire__________.A.astockindexfuturesB.aportfoliocontainingstocksofalltradedcompaniesC.acurrencyforwardcontractD.acurrencyfuturescontract17.Theamountthattheoptionpurchasermustpaytoobtainanoptioncontractmaybedescribedasoption__________.A.costB.premiumC.priceD.Alloftheabove418.ACanadiandollaroptionquotedas“C$Sep9800put”issellingontheCMEatapriceof$0.0026/C$.ThesizeofthecontractisC$100,000.Assumethespotexchangerateonthematuritydayturnsouttobe$0.95/C$.Youwillhave__________ifyouhold10contracts.A.$30,000netprofitB.$30,000netlossC.$27,400netprofitD.$27,400netloss19.Afixed-to-fixedcurrencyswapisusedto__________.A.hedgecurrencyriskB.speculatediscrepanciesoftheexchangerateC.makearisklessprofitD.Alloftheabove20.ExxonandChaseManhattanBankreachedanagreement.Inthenexttwoyears,ExxonwouldpayfixedpriceofoiltoCh