summer - Family name comma personal names Your student ID...

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ACT245 Sum09 TT2 v03 Privacy Version Code A for web Page 1 of 11 Family name, comma, personal names:____________________________________ Your student ID:______________________________________________________ Your signature: ______________________________________________________ UNIVERSITY OF TORONTO Faculty of Arts and Science ACT245 Sum09 TERM TEST 2, JULY 22, 2009 Duration 50 Minutes Aids: All calculators allowed. Scrap paper OK if needed. Instructor: Keith Sharp PhD FCIA FSA CFA NOTES: 1. Please identify your privacy version code in the page footer (small letters at bottom of this page, A, B, C or D) and blob it as the answer for the question after the last real question (so blob as question 11 for a 10-question term test, as question 25 for a 24 question final). 2. It’s OK to write on book. 3. This is a closed book exam. 4. Multiple choice: only your letter answer mark sense sheet will be graded. 5. Mark sense sheets: please write in both the blobs and eye-readable identifiers 6. Mark sense sheets: pencil preferred, ink might have to be hand-graded 7. Each question: 10 points correct, two if blank, zero points if wrong 8. So expectation if you guess is the same as leaving a blank. 9. Make sure you’ve indicated your letter answers on the mark sense sheet before time’s up 10. Please stay in your seats and don’t talk till all materials have been collected. 11. Photo ID on desk during exam 12. Name and student ID and signature on this question paper and on mark sense sheet 13. Good luck!
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ACT245 Sum09 TT2 v03 Privacy Version Code A for web Page 2 of 11 1. The force of interest is 2% per annum and does not change. At time 0 you enter into a long forward contract to buy platinum at time 2 years. The contracted delivery forward price F 0, 2 is $1200 per ounce. Platinum has zero storage cost and has zero convenience yield. At time 1 the spot price of platinum is S 1 =$1300 per ounce. Calculate the value of your original forward contract (‘the value of the piece of paper’) at time 1. (A) Less than $120.000 (B) $120.000 but less than $121.000 (C) $121.000 but less than $122.000 (D) $122.000 but less than $123.000 (E) $123.000 or more (E)Solution: F 1,2 = 1300*exp(0.02*1) = 1326.2617 PV 1 (contract at 1200) = (1300*exp(0.02*1) -1200* exp(-0.02*1) ) = 1300 - 1200* exp(-0.02*1) = 1300 -1176.238=123.762 This makes sense: at time 1 could pay 1300 to buy the platinum immediately. Or could pay 1176.238 to buy a 1 year zero-coupon bond and then use the proceeds and the piece of paper at time 2 to get the platinum.
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ACT245 Sum09 TT2 v03 Privacy Version Code A for web Page 3 of 11 2. Lisa Chow sells short $1,000 market value of Knox College Lawn Mowing Inc. The margin
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This note was uploaded on 12/21/2010 for the course ACT act245 taught by Professor Act during the Spring '08 term at University of Toronto.

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summer - Family name comma personal names Your student ID...

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