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b 42. You have taken a short position in a futures contract on corn at $2.60 per bushel. Over the
next 5 days the contract settled at 2.52, 2.57, 2.62, 2.68, 2.70. You then decide to reverse
your position in the futures market on the fifth day at close. What is the net amount you
receive at the end of 5 days?
a. $0.00
b. $2.60
c. $2.70
d. $2.80
e. Must know the number of contracts
MARK TO MARKET
a 44. If you bought a futures contract for $2.60 per bushel and the contract ended at $2.70 after
several days of trading of $2.52, $2.57, $2.62, $2.68, and $2.70. What would the mark to
market sequence be?
a. -.08, .05, .05, .06, .02
b. .08, -.05, -.05, -.06, -.02
c. .08, .03, -.02, -.06, -.10
d. -.08, -.03, .02, .06, .10
e. .10, .06, .02, -.03, -.08
FUTURES CONTRACTS
c 47. A bank has a $50 million mortgage bond risk position which it hedges in the Treasury
bond futures markets at the Chicago Board of Trade. Approximately how many contracts
are needed to be held in the hedge?
a. 5
b. 50
c. 500
d. 5,000
e. 50,000
DURATION
b 49. The duration of a 2 year annual 10% bond that is selling for par is:
a. 1.00 years.
b. 1.91 years.
c. 2.00 years.
d. 2.09 years.
e. None of the above.
SWAPS
d 50. Firm A is paying $750,000 in interest payments a year while Firm B is paying LIBOR plus
75 basis points on $10,000,000 loans. The current LIBOR rate is 6.5%. Firm A and B
have agreed to swap interest payments. What is the net payment this year?
a. Firm A pays $750,000 to Firm B
b. Firm B pays $725,000 to Firm A
c. Firm B pays $25,000 to Firm A
d. Firm A pays $25,000 to Firm B
e. None of the above.
NOTE PRICE
e 51. A Treasury note with a maturity of 2 years pays interest semi-annually on a 9 percent
annual coupon rate. The $1,000 face value is returned at maturity. If the effective annual
yield for all maturities is 7 percent annually, what is the current price of the Treasury note?
a. $960.68
b. $986.69
c. $1,010.35
d. $1,034.40
e. $1,038.99
DURATION
c. 52. Calculate the duration of a 7-year $1,000 zero-coupon bond with a current price of
$399.63 and a yield to maturity of 14%.
a. 5 years
b. 6 years
c. 7 years
d. 8 years
e. 9 years
DURATION
b 53. Calculate the duration of a 4-year $1,000 face value bond, which pays 8% coupons
annually throughout maturity and has a yield to maturity of 9%.
a. 3.29 years
b. 3.57 years
c. 3.69 years
d. 3.89 years
e. 4.00 years
IV. ESSAYS
Equity $3 Million
54. Calculate the duration of Tiger State Bank's assets and liabilities.
55. What new asset duration will immunize the balance sheet?