Question 1

Suppose you sell nine September silver futures contracts at the last price of the day as shown in the table below.What will be your profit or loss on this contract if the price turns out to be $12.09 per ounce at expiration?
Futures:
Silver - 5,000 troy oz,U.S.cents per troy oz.

Accepted Answer

A)  loss of $25,425
B)  loss of $7,050
C)  loss of $3,025
D)  profit of $3,025
E)  profit of $25,425F) A) and D)
G) B) and C)

Question 2

Which one of the following is true regarding forward contracts?

Accepted Answer

A)  The upfront costs to enter a forward contract can be significant.
B)  If a buyer of a forward contract earns a $200 profit then the seller will also profit by $200.
C)  The buyer wins when market prices are less than the forward price.
D)  The payoff profile for the buyer of a forward contract is an upward sloping linear function.
E)  If the seller of a forward contract earns a profit then the buyer has neither a profit nor a loss.F) B) and E)
G) A) and B)

Question 3

For years,your family has operated a business that produces lawn mowers.Over the years,the industry has progressed and new mass production techniques have been developed.However,your firm cannot afford this new technology,nor can you compete against those firms that can.Thus,the family has decided to close its facility at the end of the year.Which one of the following describes the risks to which your family's firm succumbed?

Accepted Answer

A)  forward risk
B)  volatility exposure
C)  economic exposure
D)  transactions exposure
E)  translation riskF) A) and B)
G) None of the above

Question 4

What is the closing value on this day for one March futures contract on silver?
Silver - 6,000 troy oz.:
U.S.dollars and cents per troy oz.

Accepted Answer

A)  $47,650
B)  $57,600
C)  $61,140
D)  $61,524
E)  $61,620F) A) and E)
G) C) and D)

Question 5

Browning Enterprises currently has all fixed-rate debt.The firm would like to convert part of this to floating-rate debt.Which one of the following will accomplish this for the firm?

Accepted Answer

A)  option on floating-rate bonds
B)  forward contract on U.S. Treasury bills
C)  interest rate swap
D)  currency swap
E)  interest rate call optionF) C) and E)
G) A) and B)

Question 6

Interest rate swaps:
I.benefit either the buyer or the seller,but not both.
II.are often used in conjunction with a currency swap.
III.are commonly used in business.
IV.can be used to change the index which determines the variable rate on a firm's debt.

Accepted Answer

A)  I and III only
B)  II and IV only
C)  II, III, and IV only
D)  I, III, and IV only
E)  I, II, III, and IVF) A) and B)
G) C) and E)

Question 7

The buyer of an option contract:

Accepted Answer

A)  receives the option premium in exchange for an obligation to either buy or sell an underlying asset.
B)  pays an option premium in exchange for a right to buy or sell an underlying asset during a specified period of time.
C)  pays the strike price at the time the option is purchased and in exchange receives the right to exercise the option at any time during the option period.
D)  receives the option premium in exchange for guaranteeing the purchase or sale of an underlying asset if called upon to do so.
E)  pays the option premium in exchange for receiving the strike price at a later date.F) A) and B)
G) A) and C)

Question 8

Given the following information,what is the price per troy ounce that will be used for today's marking-to-market for the December silver contract?
Silver - 5,000 troy oz.:
Dollars and cents per troy oz.

Accepted Answer

A)  $9.53
B)  $9.60
C)  $10.185
D)  $10.190
E)  $10.220F) D) and E)
G) A) and B)

Exam 23: Enterprise Risk Management

The buyer of an option contract:

Correct Answer
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Interest rate swaps: I.benefit either the buyer or the seller,but not both. II.are often used in conjunction with a currency swap. III.are commonly used in business. IV.can be used to change the index which determines the variable rate on a firm's debt.

Correct Answer
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Correct Answer
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Which one of the following is true regarding forward contracts?

Correct Answer
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Suppose you sell nine September silver futures contracts at the last price of the day as shown in the table below.What will be your profit or loss on this contract if the price turns out to be $12.09 per ounce at expiration? Futures: Silver - 5,000 troy oz,U.S.cents per troy oz.

Correct Answer
verified

Browning Enterprises currently has all fixed-rate debt.The firm would like to convert part of this to floating-rate debt.Which one of the following will accomplish this for the firm?

Correct Answer
verified

What is the closing value on this day for one March futures contract on silver? Silver - 6,000 troy oz.: U.S.dollars and cents per troy oz.

Correct Answer
verified

Given the following information,what is the price per troy ounce that will be used for today's marking-to-market for the December silver contract? Silver - 5,000 troy oz.: Dollars and cents per troy oz.

Correct Answer
verified

Exam 23: Enterprise Risk Management

The buyer of an option contract:

Correct AnswerverifiedShow Answer

Interest rate swaps: I.benefit either the buyer or the seller,but not both. II.are often used in conjunction with a currency swap. III.are commonly used in business. IV.can be used to change the index which determines the variable rate on a firm's debt.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following is true regarding forward contracts?

Correct AnswerverifiedShow Answer

Suppose you sell nine September silver futures contracts at the last price of the day as shown in the table below.What will be your profit or loss on this contract if the price turns out to be $12.09 per ounce at expiration? Futures: Silver - 5,000 troy oz,U.S.cents per troy oz.

Correct AnswerverifiedShow Answer

Browning Enterprises currently has all fixed-rate debt.The firm would like to convert part of this to floating-rate debt.Which one of the following will accomplish this for the firm?

Correct AnswerverifiedShow Answer

What is the closing value on this day for one March futures contract on silver? Silver - 6,000 troy oz.: U.S.dollars and cents per troy oz.

Correct AnswerverifiedShow Answer

Given the following information,what is the price per troy ounce that will be used for today's marking-to-market for the December silver contract? Silver - 5,000 troy oz.: Dollars and cents per troy oz.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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