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Practice Questions - 1 An investor enters into 2 futures...

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Page 1 of 2 Practice Questions for Final Exam 1. An investor enters into 2 futures contracts of frozen orange juice, each for delivery of 15,000 pounds. The current futures price is 160 cents per pound, the initial margin is $6,000 per contract, and the maintenance margin is $4,500 per contract. What price change would lead to a margin call? 2. You prefer to borrow at 10% annual interest, semi-annually compounded, than at 9.85% annual interest, continuously compounded. True/False? Explain. 3. Suppose that the LIBOR yield rate (annualized, quarterly compounded) for maturity in three months is 4%, and the LIBOR yield rate (annualized, semi- annually compounded) for maturity in six months is 3.5%. What is the 3-month forward LIBOR in three months from now (annualized, quarterly compounded)? 4. Is the 3-month forward price on a Treasury Bond higher or lower than the 3- month futures price on the same bond? Explain the intuition in detail. 5. In 6 months from now you will make a quarterly interest payment on a $1 million
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