Reading 70: Option Markets and Contracts- LOSc～ Q1-4 forward, interest, contrast, agreement, equivalent

yanghon

 

LOS c: Compare and contrast interest rate options to forward rate agreements (FRAs).

Q1. A forward rate agreement is equivalent to:

A)   a long interest rate call and a written interest rate put.

B)   either an interest rate put or an interest rate call.

C)   a swap.

 

Q2. Which combination of interest rate options most likely has the same pattern of payoffs as the short position in a forward rate agreement?

                 Interest rate call option                 Interest rate put option

 

A)             Long                                            Short

B)             Long                                            Long

C)             Short                                            Long

 

Q3. A long interest rate call and a short interest rate put is an equivalent position to:

A)   a pay-fixed interest rate swap.

B)   a long position in a forward rate agreement.

C)   a short position in a forward rate agreement.

 

Q4. A short position in a forward rate agreement is equivalent to:

A)   writing an interest rate put and buying an interest rate call.

B)   writing an interest rate call and buying an interest rate put.

C)   writing both an interest rate put and an interest rate call.

 

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