茲維博迪金融學(xué)第二版試習(xí)題庫11TB(1)

1、Chapter ElevenHedging, Insuring, and DiversifyingThis chapter contains 35 multiple choice questions, 10 short problems and 5 longer problems.Multiple Choice1. One is said to _ a risk if reducing ones exposure to a loss requires giving up the possibility of a gain, whereas _ means paying a premium to

2、 avoid possible losses.(a) diversify; hedging(b) insure; hedging(c) hedge; insuring(d) hedge; diversifyingAnswer: (c)2. A(n) _ insures creditors against losses stemming from a debtors failure to make promised payments.(a) hedge(b) credit guarantee(c) option(d) asset guaranteeAnswer: (b)3. In a forwa

3、rd contract, the price for immediate delivery of an item is termed the _.(a) spot price(b) forward price(c) face value(d) long positionAnswer: (a)4. In a forward contract, the party who commits to sell an item is said to take a _, and the party who commits to buy the specified item is said to take a

4、 _.(a) long position; short position(b) short position, spot position(c) short position; long position(d) long position; spot positionAnswer: (c)5. _ are traded on organized exchanges.(a) Forward contracts(b) Futures contracts(c) Options(d) b and cAnswer: (d)6. A(n) _ is an agreement between two par

5、ties to exchange a series of cash flows at specified intervals over a specified period of time.(a) futures contract(b) swap contract(c) option contract(d) credit contractAnswer: (b)7. The swap contract is equivalent to _.(a) a series of forward contracts(b) a series of credit contracts(c) a series o

6、f option contracts(d) a series of diversification contractsAnswer: (a)8. For a savings bank with customer liabilities that are short-term deposits earning an interest rate that changes with market conditions, one appropriate hedging strategy might be to roll over short-term bonds. This is termed _.(

7、a) a swaps contract(b) an options contract(c) matching assets to liabilities(d) an insurance contractAnswer: (c)9. _ are limits placed on compensation for particular losses covered under an insurance contract.(a) exclusions(b) caps(c) deductibles(d) copaymentsAnswer: (b)10. Life insurance policies p

8、ay benefits if an insured party dies, but such policies do not pay death benefits if the insured person takes his or her own life. This is known as a(n):(a) exclusion(b) cap(c) deductible(d) copaymentAnswer: (a)11. _ create incentives for insured parties to control their losses, and represent the am

9、ount of money the insured party must pay out of his or her own resources before receiving any compensation from the insurer.(a) exclusions(b) caps(c) deductibles(d) loan guaranteesAnswer: (c)12. _ means that the insured party must cover a fraction of the loss. (a) exclusions(b) caps(c) copayments(d)

10、 loan guaranteesAnswer: (c) 13. A(n) _ is a contract that obliges the guarantor to make the promised payment on a loan if the borrower fails to do so.(a) exclusion(b) loan guarantee(c) copayment(d) interest-rate capAnswer: (b)14. An interest rate insurance policy which guarantees a maximum interest

11、rate is known as, or takes the form of _.(a) loan guarantee(b) interest-rate guarantee(c) interest-rate floor(d) interest-rate capAnswer: (d)15. _ protect against losses from a decline in stock prices.(a) Expiration options (b) Call options(c) Put options(d) Strike optionsAnswer: (c)16. The _ is the

12、 fixed price specified in an option contract.(a) strike price(b) exercise price(c) spot price(d) a and bAnswer: (d)17. A(n) _ is the right, but not the obligation, to buy or sell something at an exercise price in the future.(a) forward contract(b) option(c) swap(d) deductibleAnswer: (b)18. A(n) _ ca

13、n be exercised on the expiration date only, whereas a(n) _ can be exercised at any time up to and including the expiration date.(a) American-type option; European-type option(b) European-type option; American-type option(c) European-type option; Asian-type option(d) American-type option; Asian-type

14、optionAnswer: (b)19. You are the Chief Financial Officer of a soybean oil company. In your job you receive dozens of different proposals each month regarding ways to hedge the companys exposure to falling soybean oil prices. How do you decide among the different proposals?(a) Choose the hedge with t

15、he best investment bank participating.(b) Choose the hedge that achieves the desired reduction in risk through the best insurance policy.(c) Choose the hedge that minimizes the cost of achieving the desired reduction in risk.(d) none of the aboveAnswer: (c)20. Which of the following are ways to avoi

16、d losses through insuring?(a) Lock in a fifteen hundred dollar fare for a holiday airfare.(b) Agree to purchase an apartment in six months for three hundred thousand dollars.(c) As a soybean grower, enter into a forward contract to sell your soybeans at a fixed price in a month.(d) none of the above

17、Answer: (d)21. Which of the following are ways to avoid losses through hedging?(a) Pay a premium for healthcare coverage.(b) Purchase a put option on a stock you do own.(c) Pay for a credit guarantee on a loan you are worried about collecting.(d) Enter into a swap to exchange a series of cash flows

18、at specified intervals over a specified period of time.Answer: (d)22. Which of the following are ways to avoid losses through insuring?(a) Pay a premium for health care coverage(b) Purchase a put option on a stock you do own(c) Both a and b(d) Neither a nor bAnswer: (c)Questions 23-25 refer to the f

19、ollowing information:An old college friend of your invests in cocoa futures and options contracts. He has told you that he believes cocoa prices are escalating. You decide to go ahead and purchase a call option on cocoa with a strike price of $0.80 per pound. That way, if cocoa prices go up, you can

20、 exercise the call, buy the cocoa and sell them at a higher spot price.Assume the price of an option on fifty thousand pounds is one thousand five hundred dollars, and you purchase six options for nine thousand dollars on three hundred thousand pounds.23. What type of transaction is this for you?(a)

21、 hedged position(b) speculative(c) insured position(d) none of the aboveAnswer: (b)24. Calculate the downside risk in dollars and percentage terms.(a) $1,500; +100%(b) $1,500; 100%(c) $9,000; 100%(d) $9,000; +100%Answer: (c)25. If the price increases to $0.85 cents per pound, how much would you net

22、after paying for the options?(a) $15,000(b) $13,500(c) $9,000(d) $6,000Answer: (d)26. You are interested in taking a vacation to Yemen next year, but you are worried about the price of the trip. Over the past three years, the price of a trip to Yemen has ranged between $3,500 and $4,500. The current

23、 price is $4,000. You wish to maintain the possibility of a lower price. How would you eliminate the possibility of rising prices, but still maintain the possibility of a gain from lower prices (a) Purchase an option today from the sponsor, which would allow you to pay the lower of $4,000 or the mar

24、ket price at the time you take your Yemen vacation.(b) Purchase an option today from the sponsor, which would allow you to pay the higher of $4,000 or the market price at the time you take your vacation to Yemen.(c) Leave it to the market.(d) Arrange a futures contract through the newspaper.Answer:

25、(a)Questions 27-30 refer to the following information.You are Chief Financial Officer of GreenShrimp and you purchase a large quantity of coffee each month. You are concerned about the price of coffee one month from now. You want to guarantee that you will not pay more than $1.60 per pound for fifty

26、 thousand pounds. You do not want to pay for insurance, but you do want to lock in a price of $1.60 per pound for fifty thousand pounds.27. What is the economics of a futures transaction if the spot price on delivery date is $1.35?(a) Cost of coffee purchased from supplier = $67,500; cash flow from

27、futures contract = $12,500 paid by GreenShrimp; total outlay = $80,000(b) Cost of coffee purchased from supplier = $67,500; cash flow from futures contract = $12,500 paid to GreenShrimp; total outlay = $55,000(c) Cost of coffee purchased from supplier = $80,000; cash flow from futures contract = $0

28、paid to GreenShrimp; total = $80,000(d) Cost of coffee purchased from supplier = $80,000; cash flow from futures contract = $12,500 paid to GreenShrimp; total =$92,500Answer: (a)28. What is the economics of a futures transaction if the spot price on delivery date is $1.80?(a) Cost of coffee purchase

29、d from supplier = $62,500; cash flow from futures contract = $12,500 paid by GreenShrimp; total outlay = $80,000(b) Cost of coffee purchased from supplier = $80,000; cash flow from futures contract = $0 paid by GreenShrimp; total outlay = $80,000(c) Cost of coffee purchased from supplier = $90,000;

30、cash flow from futures contract = $10,000 paid to GreenShrimp; total outlay = $80,000(d) Cost of coffee purchased from supplier = $90,000; cash flow from futures contract = $10,000 paid by GreenShrimp; total outlay = $100,000Answer: (c)29. You enter a coffee futures contract at a futures price of $1

31、.60 per pound. What is the variability of GreenShrimps total outlays under the futures contract?(a) $10,000(b) $90,000(c) Outlays are fixed at $80,000(d) Outlays are fixed at $90,000Answer: (c)30. You enter a coffee futures contract at a futures price of $1.60 per pound. At the time of delivery, cof

32、fee is $1.35 per pound. Should you have foregone entering into the futures contract?(a) You should have consulted an investment bank(b) You made the right move since your goal was to avoid paying more than $1.60 per pound (c) Bad move! You gave up the opportunity to pay a lower price(d) You should h

33、ave done nothing and left it to the marketAnswer: (b)Use the following information to answer questions 31-33.You are the Treasurer of Savvy Software, Inc. The U.S., your headquarter country, accounts for fifty percent of Savvy sales, while thirty percent are in Germany and twenty percent are spread

34、throughout the rest of the world. Over the next six years, you have forecasted that German sales are expected to be 35,170,000 euros each year for the next six years. The current USD/EUR exchange rate is 0.7359 euros to the dollar, and you would be happy for this to remain so during all six years. 3

35、1. How can you use a swap contract in this case?(a) Enter into a swap contract where you agree to receive or pay each year an amount of cash equal to 35,170,000 euros times the difference between the 0.7359 USD/EUR spot rate and delivery rate at the time.(b) Enter into a swap contract where you agre

36、e to receive or pay each year an amount of cash equal to 35,170,000 euros times the difference between the 0.7359 USD/EUR forward rate and spot rate at the time.(c) Enter into a swap contract where you agree to receive or pay each year an amount of cash equal to 35,170,000 euros times the spot rate

37、at the time.(d) none of the aboveAnswer: (c)32. What is the notional amount of your swap contract per year?(a) 477,918,195 EUR(b) 35,170,000 EUR(c) 2,588,160 EUR(d) 0.7359 EURAnswer: (b)33. Who might take the opposite side of this swap contract?(a) Another U.S. company with sales in Germany(b) A Ger

38、man company with sales in the U.S.(c) Another European company with worldwide sales(d) Another U.S. company with worldwide salesAnswer: (b)34. The diversification principle states that by diversifying across risky assets people can sometimes achieve a(n) _ in their overall risk exposure with _ in th

39、eir expected return.(a) increase; no decrease(b) increase; a minimal decrease(c) decrease; a minimal increase(d) decrease; no decreaseAnswer: (d)35. The part of portfolio volatility that remains no matter how many stocks are added is _.(a) diversifiable risk(b) nondiversifiable risk(c) correlated ri

40、sk(d) uncorrelated riskAnswer: (b)Short Problems1. Describe the main features of forwards contracts. How do forwards contracts differ from futures contracts?Answer:Main features of forwards contracts:· Two parties agree to exchange some item in the future at a price specified now this specified

41、 price is called the forward price.· The spot price is the price for immediate delivery of the item.· No money is paid in the present by either party to the other.· The face value of the contract is the quantity of the item specified in the contract multiplied by the forward price.

42、83; The party who commits to buy the specified item is said to take a long position and the party who commits to sell the item is said to take a short position.A futures contract is essentially a standardized forward contract that is traded on an organized exchange. The exchange interposes itself be

43、tween the buyer and the seller, so that each has a separate contract with the exchange. Standardization means that the terms of the futures contract are the same for all contracts. 2. Suppose you are Chief Financial Officer at Beazley Confectionery, Inc. and you purchase a large quantity of cocoa ea

44、ch month. You are concerned about the price of cocoa one month from now. You want to guarantee that you will not pay more than $0.80 per pound for forty-five thousand pounds. You do not want to pay for insurance, but you do want to lock in a price of $0.80 per pound for forty-five thousand pounds.(a

45、) Show the economics of a futures transaction for spot prices on delivery date of $0.70, $0.80, and $0.95.(b) What is the variability of Beazleys total outlays under the futures contract?(c) If at the time of delivery, cocoa is $0.70 per pound, should you have foregone entering into the futures cont

46、ract Why or why notAnswer:(a)CFO Beazleys Transactions$0.70/lb.$0.80/lb.$0.95/lb.Cost of cocoa from supplier$31,500$36,000$42,750Cash flow from futures contract$4,500 paid by Beazley$0$6,750 paid to BeazleyTotal outlay$36,000$36,000$36,000(b) Outlays are fixed at $36,000.(c) Regardless of the outcom

47、e of the price of cocoa at delivery date, you did the right thing since your goal was to lock the price in at $0.80 per pound. Although you gave up any opportunity to pay a lower price, you also guaranteed that you would never pay more than $0.80 per pound.3. You are a consultant living in the Unite

48、d States and have been engaged by a Japanese company to perform a project over the next year. The Japanese company is intending to pay you 2,081,300.05 yen per month. The current exchange rate is $0.009609 per yen. However, your concern is that the yen will strengthen versus the dollar and, that as

49、a result, you will receive fewer U.S. dollars each month. The Japanese company is not willing to agree to a fixed exchange rate of $0.009609 per yen; nor does the Japanese company want to come up with dollars to pay you each month. So your next step is to approach a financial intermediary about ways

50、 of eliminating your risk.(a) How do you use swap contracts in this instance to eliminate your risk?(b) In the third month, if the spot price of the yen is $0.009321,what would your cash revenues be with the swap contract What would the cash revenues be without the contract(c) In the ninth month, if

51、 the spot price of the yen is $0.010089, what will your cash revenues be with the swap contract What will your cash revenues be without the swap contractAnswer:(a) On each settlement date you agree to receive or pay an amount of cash equal to 2,081,300.05 JPY times the difference between $0.009609 a

52、nd the spot price.(b) Without the swap: 2,081,300.05 JPY x $0.009321/JPY = $19,399.80With the swap: you will receive 2,081,300.05 JPY, which you sell for $19,399.80. You then receive 2,081,300.05 JPY x ($0.009609 $0.009321) = $599.41 from the counterparty to your swap contract. Total = $19,999.21(c)

53、 Without the swap: 2,081,300.05 JPY x $0.010089/JPY = $20,998.24With the swap: you will receive 2,081,300.05 JPY, which you sell for $20,998.24. You then pay 2,081,300.05 JPY x ($0.010089 $0.009609) = $999.03 to the counterparty of your swap contract. Total = $19,999.214. Suppose you are interested

54、in an adventure tour to Siberia next year. However, you are worried about the price of such a trip, which in the past has ranged from $4,500 to $5,500. The current price of such a trip is $5,000.(a) How could you enter into a forward contract with a tour operator to eliminate your price risk?(b) Why

55、 would the operator be interested in accepting your forward contract?Answer:(a) You could enter into a forward contract with a tour operator today with an agreement to pay $5,000 next year.(b) The tour operator would be happy to lock in your reservation at the current price of $5,000 due to a concer

56、n that prices may fall below $5,000.5. An old college friend of yours invests in coffee futures and options contracts. He has told you that he believes coffee prices are escalating. You decide to go ahead and purchase a call option on coffee with a strike price of $1.25 per pound. That way, if coffee prices go up, you can exercise the call, buy the coffee and sell them at a higher spot price. Assume the price of an option on fifty thousand pounds is $1,250 and you purchase four options for $5,000 on two h