Ps3ansinternationalfinanceWord格式.docx
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Ps3ansinternationalfinanceWord格式.docx
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B)theputoptionbecomescheaperwhereasthecalloptionbecomesmoreexpensive
C)boththecallandtheputbecomecheaper
D)boththecallandtheputbecomemoreexpensive.
AnswerC)
3.Consideraputfuturesoptionwrittenononeeurofuturescontract,andeacheurofuturescontractiswrittenon€12,500.Supposetheoptionpremiumandthestrikepriceare$0.15/€and$1.5/€,respectively.Atexpirationoftheoptioncontract,thespotandthefuturesexchangerateare1.405$/€and1.4$/€,respectively.Thetotalprofit/lossfortheoptionwriteristhus
A)$1875
B)$687.5
C)$625
D)$-625
Answer
:
C).
reasoning
Theholderspaysanoptionpremiumof0.15*12,500=$1875upfront.Uponmaturity,theholderwillexercisetheoptioncontract,andgetpaidby(1.5-1.4)*12500=$1250.ThenetP/Lfortheholderisthus-$625,hencethenetP/Lforthewriteris$625
4.SupposethatyourfirmisaU.S.-basedimporterofGermanautomobileaccessories.Youpayforthemineurosandsellthemindollars.Youhavejustorderednextyear'
sinventory.Inoneyearyourfirmowesapaymentof€100,000toyourGermansupplier.Today'
sspotexchangerateis€1.00=$1.20;
theone-yearforwardrateis€1.00=$1.15.Howcanyoufixthedollarcostofthisorder?
(Answer:
A)
A)Enterintolongpositionintheone-yeareurofuturescontractat€1.00=$1.15.Thiswillfixthecostof€100,000at$115,000.
B)Enterintoshortpositionintheone-yeareurofuturescontractat€1.00=$1.15.Thiswillfixthecostof€100,000at$115,000.
C)Sincethespotpriceismorethantheforwardprice,youshouldtradeyourdollarsforeurostodayandpayyoursupplierearly.
D)Sellacalloptionontheeurowithaone-yearmaturity.
5.SupposethatyourfirmisaU.S.-basedimporterofGermanautomobileaccessories.Youpayforthemineurosandsellthemindollars.Youhavejustorderednextyear'
sspotexchangerateis€1.00=$1.20,andyoubuyaone-yearcalloptionwrittenon€100,000withthestrikepriceof$1.20/€tohedgetheriskypayable.Supposetheoptionpremiumis$0.06/€,andinoneyeartheexchangerateturnsouttobe$1.30/€.Whattheprofit/lossonyourhedgedpositionrelativetotoday’sexchangerate?
C:
thesimplestwaytothinkaboutitistonoticethatthehedgedpositionisasyntheticputoptionwiththeoptionpremiumof$0.06/€andstrikepriceof$1.20/€.Inoneyear,theputoptionfinishesOTM,hencetheU.S.importerhaslostthealltheoptionpremiumequaling0.06*100,000=$6,000)
A)$10,000
B)$4000
C)-$6,000
D)-$10,000
6.Thebestfinancialinstrumenttohedgearecurrentexposureis(Answer:
D)
A)forwards
B)futures
C)options
D)swaps
7.Whichofthefollowingstatementsabouttheportfoliofrontieris(are)correct?
B.Noteportfoliofrontierincludesbothefficientportionandtheinefficientportion,thelatterofwhichminimizesinsteadofmaximizingtheexpectedreturn)
i)Portfoliofrontierincludesboththeefficientfrontierandtheinefficientfrontier
ii)Giventheexpectedreturn,aportfolioontheportfoliofrontierhasthesmallestreturnvarianceamongallportfolios
iii)Giventhereturnvolatility,aportfolioontheportfoliofrontierhasthelargestexpectedreturn.
A)i)only
B)i)andii)
C)ii)andiii)
D)i),ii),andiii)
8.Themeanandstandarddeviation(SD)oftwostocks,AandB,areasfollows
Country
Mean(%)
SD(%)
A
10
18
B
12
20
Supposethetwostocksarenotcorrelated.Consideraportfoliowith30%investmentinAand70%investmentinB.Whatisthestandarddeviationfortheportfolioreturn?
A)13.5%
B)14%
C)15%
D)19.4%
c)rational:
applytheformula,
9.Intheabovequestion,whatistheexpectedreturnfortheglobalminimumvarianceportfolio?
A)13.67%
B)13.38%
C)10.89%
D)11.11%
C.Firstweneedtocomputetheweightsassignedtotheassetsasfollows:
.Theexpectedreturnisthus
10.(8pts)Supposetodaythe(annualized)interestratesonUSDandAUDare0%and4%,respectively,andtheexchangerateis$1/AU$.Considerthefollowingtwostrategies.InstrategyA,youborrowonemillionUSDandusetheproceedstobuyonemillionAUD.InstrategyB,youlongaone-yearforwardcontractwhichiswrittenononemillionAUD.Theinvestmenthorizonisoneyearandinterestsareonlypaidattheendoftheone-yearhorizon.Supposetheexchangeratechangesto$1.1/AU$inoneyear.
a)(2points)Calculateyourprofit/loss(quotedinUSD)fromstrategyA.
b)(3points)Calculateyourprofit/loss(quotedinUSD)fromstrategyB.(Hint:
firstdeterminetheforwardrateusingthestrictformofIRP)
c)(3points)Repeatb)whenaforwardcontractiswrittenonAUD1,000,000/Finstead,whereFdenotestheforwardexchangeratecalculatedinb).Compareyourresultwiththatina):
whatconclusioncanyoudraw?
a)FromstrategyA,youpaynointerestsfromborrowingUSD,andreceivesinterestpaymentequalingAU$0.04*1,000,000=AU$40,000=$44,000,whereI’veusedtheexchangerateinoneyear.Inaddition,theAU$1,000,000inoneyearcanbeconvertedintoto$1,100,000:
youearnanextra$100,000duetotheappreciationofAU$against$.Thus,thetotalprofitfromstrategyAis$144,000.
b)InstrategyB,weknowS=$1/AU$;
I$=0%;
IAU$=4%.ApplyingIRPimplies:
F=(1+I$)/(1+IAU$)*S=1/1.04=$0.9615/AU$.Atitsexpirationdate,thelongsideofthisforwardcontractearns
($1.1/AU$-$0.9615/AU$)*AU$1,000,000=$138,500
c)UsingF=$0.9615/AU$,wefirstcomputetheamountoftheunderlyingwhichequalsAU$1,000,000/0.9615=AU$1,040,000.Atitsexpirationdate,thelongsideofthisforwardcontractthusearns
($1.1/AU$-$0.9615/AU$)*AU$1,040,000=$144,000.
Bychangingtheamountoftheunderlying,weseetheprofitfromstrategyBexactlyequalstheprofitfromstrategyA.WeknowthatstrategyAisthecarrytradestrategy.Theaboveresultindicatesthatwecanalsoconductthecarrytradestrategybymakinguseoftheforwardmarket.
11.(10pts) UsetheEuropeanoptionpricingformulatofindthevalueofasix-monthat-the-money(ATM)calloptiononJapaneseyen.Thestrikepriceis$1=¥
100.Thevolatilityis25percentperannum;
r$=5.5%andr¥
=6%.(pleaseroundthenumbersinthefinalresultstothreesignificantdigitsonly)(hint:
convertallexchangeratesinAmericantermsbeforeusingtheBlack-Scholesformula)
Solution:
becausetheoptionisatthemoney,thespotexchangerate(dollarpriceofyen)isequaltothestrikeprice(1.5pts)
Theannualizedlengthofmaturityis0.5(0.5pt)
(1.5pts)
(2pts)
(1pt)
(2pts)
Hence
(1.5pts)
NotethatN(d)wascalculatedusingNORMSDISTinexcel.
12.(10.5pts)SupposefirmAcanissuefixed-ratedebtofthesamematurityat10.3%orfloating-ratedebtatLIBOR+0.5%.FirmBcanissuefixed-ratedebtat9.3%orfloating-ratedebtatLIBOR+0.3%.
AB
Fixed10.3%9.3%
FloatingLIBOR+0.5%LIBOR+0.3%
SupposethatApreferstoissuefixed-ratedebtwhereasBpreferstoissuefloating-ratedebt.Ifyouwereaninvestmentbanker,howcouldyouarrangeaninterestrateswapbetweenAandBtomakeeverybodyhappy?
Writeinthefigurethecashflowswitharrowstodescribeyouranswers.Inaddition,computethenetborrowingpositionforbothfirmsandthepercentagereturnsfortheinternationalbanker.(Hint:
youmayusethefollowingnumbers:
9.7%,9.6%,LIBOR+0.1%,andLIBOR+0.2%)
(correctillustrationsinthefigureareworthatotalof6pts)
ThenetborrowingpositionoffirmAis(LIBOR+0.5%)+9.7%-(LIBOR+0.1%)=10.1%,whichislessthan10.3%withoutusingtheswap,henceAishappy(1.5pts)
ThenetborrowingpositionoffirmBis9.3%+LIBOR+0.2%-9.6%=LIBOR-0.1%,whichislessthanLIBOR+0.3%withoutusingtheswap,henceBishappy(1.5pts)
Theinvestmentbankearns9.7%-9.6%+(LIBOR+0.2%)-(LIBOR+0.1%)=0.2%>
0,hencetheinvestmentbankisalsohappy(1.5pts)
13.(8pts)Supposeyoubuyacalloptionwith
=$0.03/£andX=$1.5/£,andbuyaputoptionwith
=$0.02/£andX=$1.5/£atthesametime.Bothoptionsarewrittenonpoundsandwillexpireinoneyear.Inaddition,supposethatcontractsizesare£1m
a)(3.5pts)drawtheprofitprofileonthisportfoliooneyearlater
b)(1.5pteach)whatisyourprofit(loss)whenthepoundexchangerateoneyearlateris
i)$1.5/£;
ii)$1.6/£;
iii)$1.3/£
a)seethefollowFigure.
(themaximumloss:
1.5point;
profitsonbothdirections:
2pts)
-$0.03
b)i)ifexchangerateoneyearlateris$1.5/£,theinvestorloses$0.05perpound,henceatotallossof$50,000
ii)ifexchangerateoneyearlateris$1.6/£,theinvestorgains$0.05perpound,henceatotalprofitof$50,000
iii)ifexchangerateoneyearlateris$1.3/£,theinvestorgains$0.15perpound,henceatotalprofitof$150,000
14.(6.5pts)SupposethatBoeingcorporationexportedaBoeing747toBritishAirwaysandwouldreceive£10millioninoneyear.Suppos
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