Tutorial 1
Textbook: Fundamentals of Futures and Options Markets by John C. Hull. Pearson new
International Edition. Ed 8. ISBN number: 978-1-29204-190-2
Note: Questions with * must be covered in tutorial class
Problem 1.10.
Explain why a futures contract

Chapter 4: Interest Rates
Problem 4.11*
Suppose that 6-month, 12-month, 18-month, 24-month and 30-month zero rates
continuously compounded are 4%, 4.2%, 4.4%, 4.6% and 4.8% per annum, respectively.
Estimate the cash price of a bond with a face value of 10

Chapter 1: Introduction
Problem 1.10
Explain why a futures contract can be used for either speculation or hedging.
If the trader has no exposure to the price of the underlying asset, entering into a
futures contract is speculation.
If the trader feels tha

Chapter 16: Futures Options
Problem 16.9
Suppose you sell a call option contract on April live cattle futures with a strike price of 90
cents per pound. Each contract is for the delivery of 40,000 pounds. What happens if the
contract is exercised when the

Chapter 15: Options on Stock Indices and Currencies
Problem 15.11
An index currently stands at 696 and has volatility of 30% per annum. The risk-free rate of
interest is 7% per annum and the index provides a dividend yield of 4% per annum.
Calculate the v

Chapter 13: Black-Scholes-Merton Model
Problem 13.8
A stock price is currently $40. Assume that the expected return from the stock is 15%
and its volatility is 25%. What is the probability distribution for the rate of return (with
continuous compounding)

Problem 12.8
Consider the situation in which stock price movements during the life of a European option
are governed by a two-step binomial tree. Explain why it is not possible to set up a position
in the stock and the option that remains riskless for the

Chapter 7: Swaps
Problem 7.9*
Companies X and Y have been offered the following rates per annum on a $5 million 10year investment:
Company X
Company Y
Fixed Rate
8.0%
8.8%
Floating Rate
LIBOR
LIBOR
Company X requires a fixed rate investment; company Y req

TUTORIAL 4
Chapter 3: Hedging Strategies Using Futures
Problem 3.8
In the Chicago Board of Trades corn futures contract, the following delivery months are
available: March, May, July, September and December. State the contract that should be
used for hedg

Chapter 10: Properties of Stock Options
Problem 10.9
What is a lower bound for the price of a six-month call option on a non-dividend-paying
stock when the stock price is $80, the strike price is $75 and the risk-free interest rate is
10% per annum?
The l

Introduction to
Derivatives Securities
ASSIGNMENT 1
\
Name
: Gabriella Karen Wahyanaputri
Student ID
: 17806363
Tutorial Class
: Class 2
Tutorial Day and Time
: Tuesday, 12 pm 1 pm
Tutors name
: Ronnie Soh
Singapore Campus Trimester 3A
Question 1
Answer:

TUTORIAL 3
Chapter 5: Determination of Forward and Futures Prices
Problem 5.9*
A one-year long forward contract on a non-dividend-paying stock is entered into when the
stock price is $40 and the risk-free rate of interest is 10% per annum with continuous

Chapter 1: Introduction
Problem 1.10
Explain why a futures contract can be used for either speculation or hedging.
If the trader has no exposure to the price of the underlying asset, entering into a
futures contract is speculation.
If the trader feels tha

Chapter 4: Interest Rates
Problem 4.11*
Suppose that 6-month, 12-month, 18-month, 24-month and 30-month zero rates
continuously compounded are 4%, 4.2%, 4.4%, 4.6% and 4.8% per annum, respectively.
Estimate the cash price of a bond with a face value of 10

Tutorial 10
Textbook: Fundamentals of Futures and Options Markets by John C. Hull. Pearson
new International Edition. Ed 8. ISBN number: 978-1-29204-190-2
Note: Questions with * must be covered in tutorial class
Problem 16.9.
Suppose you sell a call optio

Chapter 16: Futures Options
Problem 16.9
Suppose you sell a call option contract on April live cattle futures with a strike price of 90
cents per pound. Each contract is for the delivery of 40,000 pounds. What happens if the
contract is exercised when the