FIN 494 Exam Prepared 3_2020

FIN 494 Exam Prepared 3_2020

Question 1

• The S&P 500 futures has a multiplier 250. What is the delta of a long position in

ten futures contracts?

+1

+250

+2,500

+25,000

10 points

Question 2

• S&P 500 is now at 2,000. Ignore interest rate (assume everything is given in PV

terms). Suppose you short a $20M portfolio with a beta of 0.8. Find the delta of your portfolio.

8,000

10,000

-8,000

10 points

-10,000

-0.8*(20,000,000/2,000)= -

8000

Question 3

• A bank is short a futures contract on 1,000,000 Euro with F= $1.5 million

maturing in one year. The value of this position may decline if:

The Euro appreciates against the dollar

The Euro depreciates against the dollar

The bank faces zero risk because the futures prices is locked in

10 points The value of a short position in a futures contract will decline if the price of the underlying asset rises.

In the case of a currency futures contract, the value of a short position will decline if the exchange rate of th underlying currency rises. In this case, if the $/€ exchange rate rises, the value of a short position will decline.

If the $/€ exchange rate rises, it means that the € has appreciated because each € can buy a higher amount of $.

Therefore, the correct option is "The Euro appreciates against the dollar"

Question 4

• You are long on oil futures since May 1. On May 2, futures price on 1,000 barrels

of crude oil with January 15 delivery was $50 a barrel, while spot price of crude oil was $51 a barrel. One week later, on May 9, futures price on the same contract was $52 and spot price of crude was $53. Between May 2 and May 9,

Your account balance went up by $2,000

Your account balance went down by $2,000