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Final_4351_Fall 2010_answers.doc

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Department
Administration
Course
ADM4351
Professor
All Professors
Semester
Winter

Description
FINAL 201034 points totalPart 1 Multiple choice 1 point each truefalse 05 points each and short questions 1 point each only the final answers will be graded 14 points total1 Selling a call option gives you a payoff of a max XST 0b max STX 0c min XST 0d min STX 0e max XST2 Suppose that you enter into a short futures contract to sell July silver for 1020 per ounce on the New York Commodity Exchange The size of the contract is 5000 ounces The initial margin is 4000 and the maintenance margin is 3000 From the list below what is the minimum change in the futures price that will lead to a margin calla There will be a margin call when the price of silver decreases by 021b There will be a margin call when the price of silver decreases by 026c There will be a margin call when the price of silver increases by 021d There will be a margin call when the price of silver increases by 026e There will be a margin call when the price of silver decreases by 0343 On July 1 2010 a Japanese company enters into a forward contract to buy 1 million on January 1 2011On September 1 2010 it enters into a forward contract to sell 1 million on January 1 2011 Describe the profit or loss the company will make in yen as a function of the forward exchange rates on July 1 2010 and September 1 2010 F1 and F2 are forward exchange rates for the contracts entered into July 1 2010 and September 1 2010 and S is the spot rate on January 1 2011 All exchange rates are measured as yen per dollar a The total payoff is F1SF2S million yenb The total payoff is F1F2 million dollarsc The total payoff is F1F2 million yend The total payoff is SF1 SF2 million dollarse The total payoff is SF1F2S million yen4 A trader writes a December put option with a strike price of 30 The price of the option is 4 Under what circumstances does the trader make a gain1
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