Which of the following statements does NOT accurately reflect the relationship between securities and synthetic forward contracts?
A) Forward = stock - zero coupon bond
B) Zero coupon bond = stock - forward
C) Prepaid forward = forward - zero coupon bond
D) Stock = forward + zero coupon bond
Answer: C
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FIN 402
- When selecting among various put options with different strike prices, in order to hedge a long asset position, which of the following statements is true?
- All of the positions listed will benefit from a price decline, except:
- The spot price of the market index is $900. After 3 months, the market index is priced at $920. An investor has a long call option on the index at a strike price of $930. After 3 months, what is the investor's profit or loss?
- The spot price of the market index is $900. A 3-month forward contract on this index is priced at $930. What is the profit or loss to a short position if the spot price of the market index rises to $920 by the expiration date?
- A firm provides a service that benefits from decreasing employment. This firm has a risk exposure to macro event. All other variables being equal, which of the following derivative securities is the firm most likely use to hedge its exposure?
- According to trading volume data tabulated by the Wall Street Journal for April 15, 2010, which index futures contact experienced the highest total open interest?
- Assume that you open a 100-share short position in Jiffy, Inc. common stock at the bid-ask price of $32.00 - $32.50. When you close your position, the bid-ask prices are $32.50 - $33.00. If you pay a commission rate of 0.5%, what is your profit or loss on the short investment?
- Assume that you purchase 100 shares of Jiffy, Inc. common stock at the bid-ask prices of $32.00 - $32.50. When you sell, the bid-ask prices are $32.50 - $33.00. If you pay a commission rate of 0.5%, what is your profit or loss?
- What is the cost of 100 shares of Jiffy, Inc. stock given that the bid-ask prices are $31.25 - $32.00 and a $15.00 commission per transaction exists?
- Select the family member who is offering the most diversification to the rest of the family.
- All of the following are financially engineered products, except:
- During the growing season, a corn farmer sells short corn futures contracts in an amount equal to her crop. If upon harvesting and selling her crop she maintains the contracts, she is then considered a(n):
- A mutual fund is engaged in the short term and temporary purchase of index futures, for purposes of minimizing its cash exposures. Which "use" most closely explains their actions?
- Who from the following list would be considered a speculator by entering into a futures or options contract on commodities?
- Which of the following is not a derivative instrument?
If the answers is incorrect or not given, you can answer the above question in the comment box. If the answers is incorrect or not given, you can answer the above question in the comment box.