Derivatives

1. Which of the following derivatives are traded on an exchange?

 
 
 
 

2. Where does a derivative dеrive its value from?

 
 
 
 

3. Which of the following type of derivatives is most likely to have a non-zero value at initiation?

 
 
 
 

4. A farmer goes into a contract with a vendor to sell his crop for $1,000 in 3 months from now. What type of contract is this?

 
 
 
 

5. Alice and Dave agree to enter a forward contract. After one month, Dave will sell Euros to Alice and Alice will sell Dollars to Dave. Effectively, on expiration, only one party will make the cash payment, based on the net difference. What type of forward contract is this?

 
 
 
 

6. Sofia bought a call option for a $5 premium. Its exercise price is $35 and the underlying asset is trading for $39 at expiration. What is Sofia’s total profit or loss?

 
 
 
 

7. Using the value formula, what is the value of a put option at expiration, provided that the strike price is $20, the underlying is trading at $24, and the premium paid was $4?

 
 
 
 

8. A call option has a strike price of $109 and a premium of $15. At what price of the underlying does the option holder have a $10 net benefit?

 
 
 
 

9. Which of the following statements is false?

 
 
 
 

10. A put buyer pays a $4 premium on a put with an exercise price of $20 and a market price of the asset of $22 at the exercise date. What is the seller’s total profit/loss?

 
 
 
 

11. Lillie sells a put on a premium of $5 and an exercise price of $50. At expiration, the underlying’s market price is $40. What is Lillie’s net position?

 
 
 
 

12. Which of the following is most accurate about a replication strategy?

 
 
 
 

13. Which of the following is not a factor in determining a derivative’s price?

 
 
 
 

14. Today, an asset is trading at $50 and the risk-free interest rate is 7%. Ben enters in a forward to buy this asset after 6 months. What would be the price of this forward?

 
 
 
 

15. What is the value of the forward contract at expiration from Ben’s perspective, provided the asset’s spot price is $55?

 
 
 
 

16. An asset’s market price today is $500. If there is a futures contract agreed on it today, what would be the present value of the futures price at contract initiation? The interest rate is 10%.

 
 
 
 

17. A futures price will go up when the Net cost of carry is:

 
 
 
 

18. What will be the Forward Price when ― the underlying’s market price at contract initiation is $40, benefits are $20, costs are $18, the risk-free interest rate is 5%, and the contract’s term is 3 months?

 
 
 
 

19. Anna entered a forward agreement to buy 100 shares of company X. The duration of the contract is 1 year, and the exercise price is $150. The risk-free interest rate is 10%.

What is the present value of the forward price after 6 months have passed?

 
 
 
 

20. What would be the forward’s value for Anna after 6 months have passed? The Market price of
100 shares totals $145.

 
 
 
 

21. Anthony fixed a 10% interest rate for a forward that he agrees to buy after 10 days and to settle after 40 days. What type of forward contract is this?

 
 
 
 

22. In a FRA, the agreed rate between both parties is 10% whereas the market rate at the lending date is 11.5%. Which party benefits in this transaction?

 
 
 
 

23. A single period swap resembles:

 
 
 
 

24. A swap has 3 payment points. Roy makes a fixed payment of 10% throughout the contract, while Lacie follows a floating rate: 9%, 10%, and 11% at each point respectively.

How much did Roy pay in each of the three terms (expressed as a % difference)?

 
 
 
 

25. Which of the following is not likely to be true about swap contracts?

 
 
 
 

26. What is the fixed-rate payment of a 90-day swap, where the notional principal is $10,000, LIBOR is 8%, and the fixed interest rate is 10%?

 
 
 
 

27. A protective put is derived by:

 
 
 
 

28. The value of the protective put is equal to:

 
 
 
 

29. Assume that an asset’s price at initiation is $100. The exercise price of each option is $110, the call value is $0, and the risk-free rate is 5%. At what value of the put option, would the put-call parity hold true (for one-year options)?

 
 
 
 

30. You are given the following information: F0(T) = $80, r = 4%, T = 0.5 (6 months), p0=$0, c0=$15.

Using the formula for Put-Call Forward parity, what would be the exercise price in each option?

 
 
 
 

31. The underlying asset is trading at $20 at contract initiation. The expected value of the underlying asset after T=1 is $30. What is its up factor (u)?

 
 
 
 

32. You are given the following information: S0 = $10, d (down factor) = 0.3. Please select the S1 value of the asset.

 
 
 
 

33. Based on the risk-neutral probability formula, find the value of an option when the up factor is 0.61.1, the down factor is 0.7, and the interest rate is 3%.

 
 
 
 

34. You are given the following information: Pie = 11, c1 plus = $10, c1 minus = $4, r = 6%. Calculate the value of a call option using the binomial formula.

 
 
 
 

35. Which of the statements is true about American call options?

 
 
 
 

By submitting your email address, you consent to receive email messages (including discounts and newsletters) regarding 365 Financial Analyst and its products and services and other matters (including the products and services of 365 Financial Analyst's affiliates and other organizations). You may withdraw your consent at any time. Please click here to view 365 Financial Analyst's privacy policy.

Porter’s 5 Forces Analysis of Walmart – A Practical Example

Porter’s 5 Forces framework helps us evaluate the competitive environment in an industry. The use of this tool is

Porter’s 5 Forces Analysis of Walmart – A Practical Example

Porter’s 5 Forces framework helps us evaluate the competitive environment in an industry. The use of this tool is broad in range and strategic in nature. The results of the analysis lay a solid foundation for making the right strategic decisions. Let’s find out how it works in practice!...
Learn More

Free Cash Flow to the Firm (FCFF)

A firm’s Cash Flow Statement can be an invaluable source of information for any financial analyst. It shows how the

Free Cash Flow to the Firm (FCFF)

A firm’s Cash Flow Statement can be an invaluable source of information for any financial analyst. It shows how the business generates cash, what it uses it for, and how it manages its cash balance. Analysts can also calculate certain cash flow metrics that will get them even more insight....
Learn More

Porter’s 5 Forces Model: Bargaining Power of Suppliers

Suppliers have direct input into a firm’s products or services. For some, this may be labor, marketing, distribution, raw

Porter’s 5 Forces Model: Bargaining Power of Suppliers

Suppliers have direct input into a firm’s products or services. For some, this may be labor, marketing, distribution, raw materials, and others. In this context, a company looking to purchase plays the role of a buyer and the supplier – that of a seller. As such, businesses must maintain...
Learn More