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1. A short call position can be created from forwards and options over the same stock, with the same expiry date, and where the forward price is equal to the strike price of the options, using:

a. a short forward and long put.

b. a short forward and short put.

c. a long forward and long put.

d. a long forward and short put.

2. A firm that will issue 6-year bonds in 6-months' time may hedge this exposure by taking:

a. A long position of greater value in 3-year treasury futures.

b. A long position of lower value in 3-year treasury futures.

c. A short position of greater value in 3-year treasury futures.

d. A short position of lower value in 3-year treasury futures.

3. The convenience yield is likely to be high when:

a.a commodity faces low spot demand and expected future under-supply.

b.a commodity faces high spot demand and expected future over-supply.

c.an investment asset faces low spot demand and expected future under-supply.

d.an investment asset faces high spot demand and expected future over-supply.

4. The spot price remains the same, but the convenience yield increases unexpectedly. Which of the following is true for a hedger with a short forward position?

a. their forward position improves.

b.their forward position worsens.

c.their forward position sometimes worsens and sometimes improves.

d.their forward position stays the same.

5. The forward price of an asset increases rapidly over the life of a contract. Which of the following is true?

a.A long futures contract is preferred to a long forward contract.

b.A short futures contract is preferred to a short forward contract.

c.A short forward contract is preferred to a long futures contract.

d.A long forward contract is preferred to a long futures contract.

6. Bootstrapping involves ...

a.Calculating the yield on a bond

b.Working from short maturity instruments to longer maturity instruments determining zero rates at each step

c.Working from long maturity instruments to shorter maturity instruments determining zero rates at each step

d.The calculation of par yields

7. Bootstrapping is used to:

a.calculate forward rates from a coupon bond yield curve.

b.calculate coupon rates from a coupon bond yield curve.

c.find the period t spot rate when all the spot rates to time t-1 are known.

d.find the period t coupon rate when all the coupon rates to time t-1 are known.

8. Assuming investors are risk averse, on average, the futures price is:

a.higher than the expected spot price for hedgers with long positions.

b.higher than the expected spot price for hedgers with short positions.

c.lower than the expected spot price for speculators with short positions.

d.higher than the expected spot price for speculators with long positions.

9.

For commodities, which of the following is true?

a.Forward prices are always equal to the futures price minus the margin call

b.Forward prices are always equal to the futures price plus the margin call

c.Futures prices are always equal to the present value of the forward price

d.None of the above

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