• A one-year forward contract is an agreement where
• One side has the right to buy an asset for a certain price in one year’s time.
• One side has the obligation to buy an asset for a certain price in one year’s time.
• One side has the obligation to buy an asset for a certain price at some time during the next year.
• One side has the obligation to buy an asset for the market price in one year’s time.
• Which of the following is approximately true when size is measured in terms of the underlying principal amounts or value of the underlying assets?
• The exchange-traded market is twice as big as the over-the-counter market.
• The over-the-counter market is twice as big as the exchange-traded market.
• The exchange-traded market is ten times as big as the over-the-counter market.
• The over-the-counter market is ten times as big as the exchange-traded market.
• Which of the following best describes the term “spot price”?
• The price for immediate delivery
• The price for delivery at a future time
• The price of an asset that has been damaged
• The price of renting an asset
• Which of the following is true about a long forward contract?
• The contract becomes more valuable as the price of the asset declines
• The contract becomes more valuable as the price of the asset rises
• The contract is worth zero if the price of the asset declines after the contract has been entered into
• The contract is worth zero if the price of the asset rises after the contract has been entered into
• An investor sells a futures contract an asset when the futures price is $1,500. Each contract is on 100 units of the asset. The contract is closed out when the futures price is $1,540. Which of the following is true?
• The investor has made a gain of $4,000
• The investor has made a loss of $4,000
• The investor has made a gain of $2,000
• The investor has made a loss of $2,000
• A company knows it will have to pay a certain amount of a foreign currency to one of its suppliers in the future. Which of the following is true?
• A forward contract can be used to lock in the exchange rate
• A forward contract will always give a better outcome than an option
• An option will always give a better outcome than a forward contract
• An option can be used to lock in the exchange rate
• Which of the following is true?
• Both forward and futures contracts are traded on exchanges.
• Forward contracts are traded on exchanges, but futures contracts are not.
• Futures contracts are traded on exchanges, but forward contracts are not.
• Neither futures contracts nor forward contracts are traded on exchanges.
• Which of the following is NOT true?
• Futures contracts nearly always last longer than forward contracts
• Futures contracts are standardized; forward contracts are not.
• Delivery or final cash settlement usually takes place with forward contracts; the same is not true of futures contracts.
• Forward contracts usually have one specified delivery date; futures contract often have a range of delivery dates.
• Spot USD/JPY is 106.32. The 3-month FX forward swap points are quoted 66/65. What is the outright forward rate? Is it a premium or a discount?
USD/CAD is 1.1239
3-month US deposit is 0.4%
3-month CAD deposit is 0.75%
Calculate the 3-month forward FX (90 days)