Practice Exam 1
Dr. Lucy Ackert
100 possible points
Formula sheet permitted (oneside of a sheet of paper, only formulas)
Part 1: Multiple Choice (3 points each)
Circle the correct answer.
If more than one answer is circled, the answer is incorrect.
1. The cash prices of sixmonth and oneyear Treasury bills are 99.5 and 99.0,
respectively.
Assume a face value of $100.
What is the sixmonth spot rate?
a. 0.005
b. 0.01
c. 0.02
d. 0.025
e. 0.05
2. As in question 1, the cash prices of sixmonth and oneyear Treasury bills are 99.5 and
99.0, respectively.
What is the oneyear spot rate?
a. 0.005
b. 0.01
c. 0.02
d. 0.025
e. 0.05
3. A trader enters into a oneyear long forward contract to buy an asset for $60 when the
spot price is $57.
The spot price in one year proves to be $61.
What is the trader’s gain
or loss?
a. $3 gain
b. $1 loss
c. $1 gain
d. $4 gain
e. $3 loss
4. On the floor of a futures exchange one futures contract is traded where both the long
and short parties are closing existing positions.
What is the resultant change in open
interest?
a. up 1
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 Spring '12
 LucyAckert

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