FIN359 Examination - January Semester 2011

FIN359 Examination - January Semester 2011 - FIN359...

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FIN359 Copyright © 2011 SIM University Page 1 of 5 Examination – January Semester 2011 FIN359 Examination – January Semester 2011 Derivative Securities Friday, 27 May 2011 1:00 pm – 3:00 pm ____________________________________________________________________________________ Time allowed: 2 hours ____________________________________________________________________________________ INSTRUCTIONS TO STUDENTS: 1. This examination contains NINE (9) questions and comprises FIVE (5) printed pages (including cover page). 2. You must answer ALL questions from Section A and any FOUR (4) in section B. 3. All answers must be written in the answer book. At the end of the examination Please ensure that you have written your examination number on each answer book used. Failure to do so will mean that your work cannot be identified. If you have used more than one answer book, please tie them together with the string provided. THE UNIVERSITY RESERVES THE RIGHT NOT TO MARK YOUR SCRIPT IF YOU FAIL TO FOLLOW THESE INSTRUCTIONS.
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FIN359 Copyright © 2011 SIM University Page 2 of 5 Examination – January Semester 2011 SECTION A (Total 40 marks) You must answer ALL the questions in this section. Question 1 In futures contracts, delivery options such as what asset to deliver or where to deliver are given to the trader who has a short position in futures. (a) What is the purpose of providing these delivery options to the trader with a short position? (5 marks) (b) Does provision of these delivery options affect the futures price paid by the trader who takes a long position in futures? (5 marks) Question 2 The 180-day interest rate in Australia is 8% per annum and the interest rate in the USA is 6% per annum. The exchange rate on March 1 is AUD1 = USD0.8564. If the 180- day forward rate in the market is AUD1 = USD0.8496, what will be the arbitrage profit
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This note was uploaded on 03/30/2012 for the course FIN 359 taught by Professor Jp during the Spring '12 term at Singapore Institute of Management.

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FIN359 Examination - January Semester 2011 - FIN359...

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