1. Today's settlement price on a Chicago Mercantile Exchange (CME) Yen futures contract is $0.8011/¥100. Your margin account currently has a balance of $2,000. The next three days' settlement prices are $0.8057/¥100, $0.7996/¥100, and $0.7985/¥100. (The contractual size of one CME Yen contract is ¥12,500,000). If you have a long position in one futures contract, the changes in the margin account from daily marking-to-market, will result in the balance of the margin account after the third day to be
A. $1,425.
B. $1,675
. C. $2,000
. D. $3,425.
2. A European option is different from an American option in that
A. one is traded in Europe and one in traded in the United States.
B. European options can only be exercised at maturity; American options can be exercised anytime till maturity.
C. European options tend to be worth more than American options, ceteris paribus.
D. American options have a fixed exercise price; European options' exercise price is set at the average price of the underlying asset during the life of the option.
3. The current spot exchange rate is $1.55 = €1.00 and the three-month forward rate is $1.60 = €1.00. Consider a three-month American call option on €62,500. For this option to be considered at-the-money, the strike price must be
A. $1.60 = €1.00
B. $1.55 = €1.00
C. $1.55 × (1+i$) 3/12 = €1.00 × (1+i€) 3/12
D. none of the above
4. The current spot exchange rate is $1.55 = €1.00 and the three-month forward rate is $1.60 = €1.00. Consider a three-month American call option on €62,500 with a strike price of $1.50 = €1.00. Immediate exercise of this option will generate a profit of
A. $6,125
B. $6,125/(1+i$) 3/12
C. negative profit, so exercise would not occur
D. $3,125
5. The current spot exchange rate is $1.55 = €1.00 and the three-month forward rate is $1.60 = €1.00. Consider a three-month American put option on €62,500 with a strike price of $1.50 = €1.00. Immediate exercise of this option will generate a profit of
A. $6,125
B. $6,125/(1+i$) 3/12
C. negative profit, so exercise would not occur
D. $3,125