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Unformatted text preview: . 21. The steel: price efKYZ experiences the fellew'mg ﬂuetuaﬁene ever the year. _ _
The brokerage eemmieemn 1e [1.4% of the hui er as]; ynee. Den huge 100 eheree of m on April 1 ehd eelle eﬂef hie Sheree en Deteher 1. Determine Dan's gain es efDeteher 1; C mm (L Ca Wt r A) eneee M '  “113,. hi 322.52 Lmﬁg tab > (C) 353.35
(D) 355.35
(E) 405.51 M W —~
Hm '
. (CMkt: ‘> + (gé “S _
 x . . — K 31251,
g; i.
l 'J‘D “Jr _ g
Exam MmPraetlee Exam}:  23 (U .r 9. Dn J ﬂﬂuﬂﬂ 1, EDDT, Cindy eeld ateck Z shert for $100 with a margin requirement of MA.
Du December 31, 2007, the eteek paid a dividend ef $3,erui an interest amount ef $5 wee credited tn the mergjh account. Du J Bauer]; 1, ZDDB, Cindy CIJVEtEd the eh'ert sale at e price of $95, earning a return of
9.3%. Calculate M (A) 25%
(B) 33%
(e: 50% 137%
T5% Exam M: Practice Exam 2 I . 11  e t”
. 16. Steve and Laura each cell a different etnck ehcrt at the beginning cf the year according tn
the Ecllcwing tehle cf inl’crtcain'nn.  ‘ 47 5 X
m The margin interest rate ie an annual effective rate. Each etcck paye ite dividend at the
end cf the year. Immediately thereafter, Steve and Laura each buy heck their etnck at the price indicated in the table.
Steve's annual effective yield an the chart aale exactly matches Laura's annual effective
yield an the ahnr't sale.
Balmﬂatel. kﬁfﬁxTF at“ L
.. + (A) 525 ‘ C'
. can mx.'15“£L: harm ‘ic‘h'j
@ 575 4
(D) ecc . ' l ’2 e ’5.
(E) 625 
.d—v' : ‘ Q1 3 3
(an x “13' v; 'c (e
(35“ ﬂt73—i'cTBE 5 +
( a m a >4 > ‘
l D
' >< = S 7 S“
Exam FMI'E: Practice Exam 1  13 . GD " 3. Glen eelle lﬂD shares of a steak short. The stock’s current Iper share price ie 5515. After
one year, the stock pays a dividend of $1.53 per share. Immediately after the dividend i5
paid, ehe buys the steel: back 531' $71 per ehare. ' ' Shelt eellere are required to depeeit M96 of the initial value of the Sheree that are eeld
short in a margin account at the time of the short sale. i The prevailing interest rate ie an mmqu effehtive rate 111' 5%. Glee earns a 10.0% yield an
the treneeetion. CalenleteM
(A) 25% ,.
(B) 33%  . 7‘ ST x M y: tag
I] 50% M 1 + 57% 1) 8— ﬁ Kf : .
(E) 15% '  . L71.“ — 7 1 5 m H ééﬂ 7 Exam FMJ'E: Preciiee Exam 3 . 5  19. The futures price ef the S&P EDI} index ie currently $1,500. You enter' into 5 SEEP EDD
futtree cuminads. (‘tu HM mm > The initial margin is 20313. You earn a centinueuely eumpeunded rate ef
margin balance. 4% an yen: Yeur peeitien is marked ta market weekly and the maintenance margin is T5“. of the
initial margin emeunt. . Determine the greateet 3&1” EDI] index futurea price Due week Emm teday' at which you
will receive a margin call. . . {3,} 1,435.05 . h
(B) I1,4BB.2E I ﬁn K L/J m I ' 2:22: W 22'me w «23 Mm
@ 1:42“? ca” MAN«n12 %~ﬂ {L Md]. Exam M2: Practice Exam 1 . 21  .J. r, _ 9... 28. A certejn ateck is currently priced at $65. Dividends are paid altthe end cf every quarter
end the dividends are level over the next 15 years. The next dividendcf $175 will he
paid one quarter. The armuel effectiVe interest rate ie 10%. Determine the price cf" a tenyear prepaid ﬁerard contract. {A} 19.11
(13} 2531 1 a 0
(0} 32.50 PW “‘0‘ r @123 : 13 pucp‘vﬁmmégm) e érgl‘lvu = “ESJU ll 11; BL ‘17" E: a”
kt 19 t' “J m E
LL LEO — qu‘ll lqy 96 ‘ C  Exam Free: Practice Exam 2 _ an _ ,_ 2. You are given the following inﬁnrmaﬁan about attack EYE:
I The current stack price is $5. 6— S I I The stack page dividends continuously at a rate of S.
I The forwerd price for dehwery 01’ Due share of M stock in nine months ie $F.
I The eurreapunding forward premium ie LETTBBi. The eenﬁnuuusly campeunded ﬂakfree ﬂutereﬁt rate ie 15%. Determine 6'. @ {1.050 I: _ . (H) 0.055 g :3 ‘4‘”???le =7 [77' ga‘g’sﬁ
(c) _e.eee  KC woﬁu
{D} Ilﬂﬁﬁ _ 9. K3; C1 (E) 0.070 @qulgwﬂl : 7.9 C). .rﬁ“.
if
5?
re ;
g
i]
E
'3?
(D C Exam M2: Practice Exam 2  4 v ,r
(O i 5. Aardvark Airlines {AA} would like to limit its exposure to ﬂuctuations in the price of jet
fuel. AA. expects the market price for a glecn of jet fuelin one year to he between $2.51] and $2.?5. Its expected revenue per gallon of jet fuel is save. AA has decided to hedge this risk by selling a collar using one put option. and one call
' a c owing table contains the various opﬁon prices available to AA: The continuously compounded riskErce interest rate is 5.35%. Based on Ali’s expectations for the market price of jet fuel in one veer1 which interval
represents the range of possible prdﬁt one yet: iron: now on a gallon of jet fuel basis for AA? (A) omnier talcum : [bi Jr WCAQ
(G) olsv to {1:42 9 Q: I .5515
(D) o.42mo.47’ {LO Q Ch r Dg\4® (E) or: to ass '
n
\J (I. Exam FMa'Zf Practice Exam 1  '1'  [0 You are given the £011nt infurmatiun:
. I The current price to hug,T mm 31mm dfm stock is $12!]. If" '‘ I 7'10 I The stock dues not pay dividends. {3‘ a '— 5" if} L/ K. I I A European call dptidn an one share of HE shock with n stﬁke price of $125 that
expim's in Ed: months is $169. {:5 C '  A European pnt Dptiﬁﬂ on due share of EYE stock with a strike price of $125 that
expires in Ed: mum.115 is $9.35!.(ihﬁ 1:: . The risk+free interest rate, mmpdunded cdnﬁnnoualy, is r.
Calculate I". . .>
5.35% I!
5.40% ' _  "'* ll 3 —¢"1
(C) 5.45% 7‘91 "r [15 E9 : qﬁ ‘31 1 12,053;
(13} 5.5054. _ K  I F, S
{E} 5.55% C”
'Y‘: is 3 5' '/ .  Exam M2: Practice Exam 1  12  l‘. .2. Yen are given the fellewing'infcrmeﬁcn:
.  Cine Share of the Pats index currently cells for $1,500.  S
I The FEES index ticcs net FE}! dividends. C‘s : 43 Y _
s The annual effective riekFEree rate ie 5%.— “fr = Q “1/”! 1/ F“ You woulqi like tn lock in the ability to hm}: this index in nne for $1,511]. You create a synthetic fnrwnrd peeiticn en the index 1with a European pnt option and a European cEJJ
opﬁuﬂ with Hie emne‘ Strike price. The price of the put in $154.45 and the price of the call
is $145.ﬂ1.  Determine the prnﬁt at time one year if the price of the index ie $1,650: at that time. (A) —1I_'IE.T1 F M W W (B —22.21 N A“! #71:} l
6% ﬁﬂ'ﬂl Se : C 4;. K a __ P {D} 111.5? . ‘ i {E} . 16332 I mi M are Laue. cam r—Fﬂ<1‘{r§~m> + g?
(DIMCt tilde}; Ct: L 1 Q G
W£gg <1..Em/1aé> {(350
1.21;, Us 5’13
_ I
Ch:
D . Exam M2: Practice Exam 1  4  @ f,
‘i' 24. The current price of stock KY3 ie $5ﬂ. Trudy is heerieh on the stock and creates a
syntheiﬁc ehort forward position using one cell and one put on the stock, each with a strike price of $55 and a eixnmonth time to expiration. < MSJM E g 1: ~ ¢ j
The price of 1the put option is $5.33 and the price of the cell option is $1.90.
The annual effective riskﬂee interest rate ie 4%. Assuming the price of the stock at time six months ie $4150, determine Trudy'e proﬁt at
that time.  QLAI’IFMQ‘L‘L (JimQt W ‘1‘“; “FM E L cm. W ecu: L
_ 1‘1.. .— if :2: #36 =<C>+ P <Ke (E) 3.31 . ' +110 qt i
<me> L W450 19— Gwﬂiﬁﬁiﬁi’
(esﬂei " SIC ("“i‘ 1"” g "I ﬂ
Exam FMIE: Practice Exam 3  26  r. I .
'v 29. Which of the {allowing heel: describe the maximum gain for a short cell?
(A) Unlimited
(13} Forward price
(U) Ellike price less future value of premiums
(D) Future value of premiums lees strike price @ Future value of premiums Exam Fhﬂ'ﬂ: Practice Exam 3 '  31 — r" .
' 13. Which of the following produce.9 the some cash ﬂows as a long position on a stock? [M Short forward and short zerocoupon bond I {19:} _, Long forward and short zerocoupon bond? I @531 «Pg {15) Short forward and long zoronmpon bond /
Long forward and long zerocoupon bond O i L/
[E] Long forward and long call If. Exam FMJ'Z: Prantioo Exam 1  2E}  Lena Mm (aware O @ f
“#17. Mary Ellen eeﬂé one lingerstrike cell and bugmagheeetdke cells, with all the nptiuna 
having the same 11:: erly‘ing asset end the same e be maturity. Which of the following graphs depict the pattern at preﬁte from this. strategy? eHurLT
rim: 3
ffazeew LA), {13) (C) . Lone CeLLﬂrf'ﬁL  (D) 4mm“ (Iv~h—Lr‘3‘rfL
(F '
I .  (E) bum. WRGeP Exam FMIE: Practice Exam 3 ~ 19  'a 30. Which of the following graphs depict the proﬁt pattern of a written strangle? “’4 j GHMELT‘ MZEDDLG (B) LoHFa QTRN’DLE @ c:sz Wham:— {D} ‘ {,me émmm'e (E) EUTFG'IQ ‘FD/ TH “END {IF WAHDN"
L,   H STOP H
Exam Fm: Practice Exam 2  32 n r (O
. 11'. Which of the following statements shunt sellers is FALSE?  (A) A cells: is the purchase sf :1 lowerstrike put eptien end. the sale of a highsrstn'lce
i call option. T (B) The caller width is the difference between the tell and the put strike prices. (0}
T ___. . (D) A written cells: resembles a short fewerd euntrect.
T!" T A collared. stuck entails buying a cells: when the stock is already owned. (E) Fer any given stock, there is an inﬁnite number at“ esseeieted. tern—enst cellars. a: {teiT'
(“a Exam M2: Practice Exam 2  13 _ (a.. [ .
.Fl3. Which of the following are reasons W‘th ﬁrms might elect to hedge? (A) Tranaaaﬁan meta
Gusthenaﬁt analyaia {C} Managerial rial: aversion
) Managerial controls (E) Tax and amoLmﬁDg campﬁcatiuna Exam FMIE: Practice Exam 3  15 _ ...
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This note was uploaded on 03/02/2012 for the course MATH 172 taught by Professor Kong during the Winter '09 term at UCLA.
 Winter '09
 kong

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