An

exchange rate is 0.7000 and the six-month domestic and foreign risk-free

interest rates are 5% and 7% (both expressed with continuous compounding). What

is the six-month forward rate?

The price of a stock on February 1 is $62. A trader sells 100 put options on the stock with a strike price of $60 when the option price is $2.5. The options are exercised when the stock price is $55. The trader’s net profit or loss is

A company enters into a long futures contract to buy 2,000 units of a commodity for $120 per unit. The initial margin is $12,000 and the maintenance margin is $8,000. What futures price will allow $4,000 to be withdrawn from the margin account?

A company

can invest funds for five years at

The spot price of an asset is $30 and the risk-free rate

for all maturities is 10% with continuous compounding. The asset provides an

income of $2 at the end of the first year and at the end of the second year.

What is the three-year forward price?

A speculator can choose between buying 50 shares of a stock for $20 per share and buying 500 European call options on the stock with a strike price of $22.5 for $2 per option. For second alternative to give a better outcome at the option maturity, the stock price must be above

A short

forward contract that was negotiated some time ago will expire in three months

and has a delivery price of $40. The current forward price for three-month

forward contract is $42. The three-month risk-free interest rate (with

continuous compounding) is 8%. What is the value of the short forward contract?