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LOS c: Calculate and interpret the price and the value of 1) a forward contract on a fixed income security, 2) a forward rate agreement (FRA), and 3) a forward contract on a currency.
Q1. Consider a 9-month forward contract on a 10-year 7% Treasury note just issued at par. The effective annual risk-free rate is 5% over the near term and the first coupon is to be paid in 182 days. The price of the forward is closest to:
A) 1,037.27.
B) 1,001.84.
C) 965.84.
Q2. The U.S. risk-free rate is 2.96%, the Japanese yen risk-free rate is 1.00%, and the spot exchange rate between the United States and Japan is $0.00757 per yen. Both rates are continuously compounded. The price of a 180-day forward contract on the yen and the value of the forward position 90 days into the contract when the spot rate is $0.00797 are closest to:
Forward Price Value After 90 Days
A) $0.00764 $0.00212
B) $0.00764 $0.00037
Q3. Calculate the price of a 200-day forward contract on an 8% U.S. Treasury bond with a spot price of $1,310. The bond has just paid a coupon and will make another coupon payment in 150 days. The annual risk-free rate is 5%.
A) $1,333.50.
B) $1,305.22.
C) $1,270.79.
Q4. 30 days ago, J. Klein took a short position in a $10 million 90-day forward rate agreement (FRA) based on the 90-day London Interbank Offered Rate (LIBOR) and priced at 5%. The current LIBOR curve is:
- 30-day = 4.8%
- 60-day = 5.0%
- 90-day = 5.1%
- 120-day = 5.2%
- 150-day = 5.4%
The current value of the FRA, to the short, is closest to:
A) ?$15,154.
B) ?$15,495.
C) ?$15,280.
Q5. What is the value of a 6.00% 1x4 (30 days x 120 days) forward rate agreement (FRA) with a principal amount of $2,000,000, 10 days after initiation if L10(110) is 6.15% and L10(20) is 6.05%?
A) $767.40.
B) $745.76.
C) $700.00.
Q6. Monica Lewis, CFA, has been hired to review data on a series of forward contracts for a major client. The client has asked for an analysis of a contract with each of the following characteristics:
1. A forward contract on a U.S. Treasury bond
2. A forward rate agreement (FRA)
3. A forward contract on a currency
Information related to a forward contract on a U.S. Treasury bond: The Treasury bond carries a 6% coupon and has a current spot price of $1,071.77 (including accrued interest). A coupon has just been paid and the next coupon is expected in 183 days. The annual risk-free rate is 5%. The forward contract will mature in 195 days.
Information related to a forward rate agreement: The relevant contract is a 3 × 9 FRA. The current annualized 90-day money market rate is 3.5% and the 270-day rate is 4.5%. Based on the best available forecast, the 180-day rate at the expiration of the contract is expected to be 4.2%.
Information related to a forward contract on a currency: The risk-free rate in the U.S. is 5% and 4% in Switzerland. The current spot exchange rate is $0.8611 per Swiss France (SFr). The forward contract will mature in 200 days.
Based on the information given, what initial price should Lewis recommend for a forward contract on the Treasury bond?
A) $1,073.54.
B) $1,070.02.
C) $1,035.12.
Q7. Suppose that the price of the forward contract for the Treasury bond was negotiated off-market and the initial value of the contract was positive as a result. Which party makes a payment and when is the payment made?
A) The short pays the long at the maturity of the contract.
B) The long pays the short at the maturity of the contract.
C) The long pays the short at the initiation of the contract.
Q8. Suppose that instead of a forward contract on the Treasury bond, a similar futures contract was being considered. Which one of the following alternatives correctly gives the preference that an investor would have between a forward and a futures contract on the Treasury bond?
A) The futures contract will be preferred to the forward contract.
B) The forward contract will be preferred to the futures contract.
C) It is impossible to say for certain because it depends on the correlation between the underlying asset and interest rates.
Q9. Based on the information given, what initial price should Lewis recommend for the 3 × 9 FRA?
A) 4.96%.
B) 5.66%.
C) 4.66%.
Q10. Based on the information given and assuming a notional principal of $10 million, what value should Lewis place on the 3 × 9 FRA at time of settlement?
A) $38,000 paid from short to long.
B) $37,218 paid from long to short.
C) $19,000 paid from long to short. | 
发表于 2009-3-27 16:18
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