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Questions on Forwards and Options 1. The spot price of the market index is $900.A3 month forward contract on this Index is priced at $930. What is the profit or loss to a short position if the spot price of the market index rises to $920 by the expiration date? 2. The spot price of the market index is $900. A 3-month forward contract on this index is priced at $930. The market index rises to $920 by the expiration date. The annual rate of interest on treasuries is 4.8% (0.4% per month). What is the difference in the payoffs between a long index investment and a long forward contract investment? (Assume monthly compounding.) 3. The spot price of the market index is $900. A 3-month forward contract on this index is priced at $930. The annual rate of interest on treasuries is 4.8% (0.4% per month). What annualized rate of interest makes the net payoff zero? (Assume monthly compounding.) 4. The spot price of the market index is $900. After 3 months the market index is priced at $920. An investor has a long call option on the index at a strike price of $930. After 3 months what is the investor's profit or loss? Questions on Forwards and Options 5. The spot price of the market index is $900. After 3 months the market index is priced at 5920 The annual rate of Interest on treasures is 4.8% (0.4% per month). The premium on the long put with an exercise price of $930, is $8.00 What is the profit or loss at expiration for the long put? 6. The spot price of the market index is $900. After 3 months the market index is priced at 5920. The annual rate of interest on treasuries is 4.85 (0.4% per month). The premium on the long put, with an exercise price of $930, is $8.00. At what index price does a long put investor have the same payoff as a short index investor? Assume the short position has a breakeven price of 5930 7. The spot price of the market index is 5900. The annual rate of interest on treasuries is 4.8% (0.4% per month). After 3 months the market index is priced at $920. An investor has a long call option on the index at a strike price of $930. What profit or loss will the writer of the call option earn it the option premium is $2.00? B. The spot price of the market index is $900 After 3 months the market index is priced at 5920. The annual rate of interest on treasuries is 4 8% (0.4% per month). The prem long put, with an exercise price of $930, 658.00. Calculate the profit or loss to th position if the final index price is 5915 be Questions on Forwards and Options PPN il 91144:40 PM DERIVATIVES.pdf : 7. The spet price of the marketinden the war rate of internt on treasure (0.4% per month). After month the 970. Anwestora a lon call option on the dat Who will the writer of the option earn if the optionem The spot price of the marie SANA the market deprived $930 The annual rate of per month The premium on the long put with an en 500, the profit lon ta the short put position if the final index Questions on Forward and Options 9. If your homeowners Insurance moms.000 and your deductible is S2000, what could be considered the strike the home has a value of $120,000? 10. A put option if purchased and held for price on the underlying asset is $40. If the current price the future value of the original option premium is (-$1.62)what the put profit. If any at the end of the year? 11. The premium on a long term call option on the market index with an exercise price of 950 is $12.00 when originally purchased. After 6 months the position is closed and the index spot price is 965. If interest rates are 0 per month, what is the Call Payoff? 12. The premium on a call option on the marketindex with an exercise price of 1050 is $9.30 when originally purchased. After 2 months the position is closed and the index spot price is 1072. if interest rates are 0.5% per month, what is the Call Profit? Questions on Risk Management 1. To plant and harvest 20,000 bushels of corn, Farmer Jayne incurs fixed and variable costs totalin $33,000. The current spot price of com is $1.80 per bushel What is the profit or lose the spot price is $190 per bushel when she harvests and sells her corn 2. Farmer layne decides to hedge 10,000 bushes of corn by purchasing put options with a strike price of $1.80 Six-month interest rates are 4.0% and the total premium on all puts $1,200. if her total costs are $165 per bushel what is her marginal change in profits of the spot price of corn drops from $10 to $1.75 by the time she sells her crop in 6 months 3. A 6-month forward contract for com exists with a price of $1.20 per bushel. If Farmer Jayne decides to hedge her 20,000 bushels of com with the forward contract, what is her profit or loss i spot prices are $165 OF 51.80 when she sells her crop months? Her total costs are $33,000 4. Corn call options with a $1.75 strike price are trading for a 50.14 prem Jayne decides to rede her 20,000 Babels of corn by selling short call Sixmonth interest rates are 4.0% and she plans to close her position in What is the total premium she will earn on her short position

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