金融英语考试模拟试题及答案(07)
SECTION 1
1. D C B A C ， B C D C B
SECTION 2
Reading Comprehension: (10 points)
1) The correct answer was D!
The forward price (FP) of a fixed income security is the future value of the spot price net of the present value of expected coupon payments during the life of the contract. In a formula:
FP = (S0 – PVC) x (1 + RF) T
A 6 percent coupon translates into semiannual payments of $30. With a risk-free rate of 5 percent and 183 days until the next coupon we can find the present value of the coupon payments from:
PVC = $30/ (1.05)183/365 = $29.28.
With 195 days to maturity the forward price is:
FP = ($1,071.77 – $29.28) x (1.05)195/365 = $1,070.02.
2) The correct answer was D!
If the value of a forward contract is positive at initiation then the long pays the short the value of the contract at the time it is entered into. If the value of the contract is negative initially then the short pays the long the absolute value of the contract at the time the contract is entered into.
3) The correct answer was D!
The forward contract will be preferred to a similar futures contract precisely because there is a negative correlation between bond prices and interest rates. Fixed income values fall when interest rates rise. Borrowing costs are higher when funds are needed to meet margin requirements. Similarly reinvestment rates are lower when funds are generated by the mark to market of the futures contract. Consequently the mark to market feature of the futures contract will not be preferred by a typical investor.
4) The correct answer was A!
The price of an FRA is expressed as a forward interest rate. A 3 x 9 FRA is a 180-day loan, 90 days from now. The current annualized 90-day money market rate is 3.5 percent and the 270-day rate is 4.5 percent. The actual (unannualized) rates on the 90-day loan (R90) and the 270-day loan (R270) are:
R90 = 0.035 x (90/360) = 0.00875
R270 = 0.045 x (270/360) = 0.03375
The actual forward rate on a loan with a term of 180 days to be made 90 days from now (written as FR (90, 180)) is:
Annualized = 0.02478 x (360/180) = 0.04957 or 4.96%.
5) The correct answer was C!
The value of the FRA at maturity is paid in cash. If interest rates increase then the party with the long position will receive a payment from the party with a short position. If interest rates decline the reverse will be true. The annualized 180-day loan rate is 4.96 percent. Given that annualized interest rates for a 180-day loan 90 days later are expected to drop to 4.2 percent, a cash payment will be made from the party with the long position to the party with the short position. The payment is given by:
The present value of the FRA at settlement is:
38,000 / [1+ (.042 x 180/360)] = 38,000 / 1.021 = $37,218
1. D C B A C ， B C D C B
SECTION 2
Reading Comprehension: (10 points)
1) The correct answer was D!
The forward price (FP) of a fixed income security is the future value of the spot price net of the present value of expected coupon payments during the life of the contract. In a formula:
FP = (S0 – PVC) x (1 + RF) T
A 6 percent coupon translates into semiannual payments of $30. With a risk-free rate of 5 percent and 183 days until the next coupon we can find the present value of the coupon payments from:
PVC = $30/ (1.05)183/365 = $29.28.
With 195 days to maturity the forward price is:
FP = ($1,071.77 – $29.28) x (1.05)195/365 = $1,070.02.
2) The correct answer was D!
If the value of a forward contract is positive at initiation then the long pays the short the value of the contract at the time it is entered into. If the value of the contract is negative initially then the short pays the long the absolute value of the contract at the time the contract is entered into.
3) The correct answer was D!
The forward contract will be preferred to a similar futures contract precisely because there is a negative correlation between bond prices and interest rates. Fixed income values fall when interest rates rise. Borrowing costs are higher when funds are needed to meet margin requirements. Similarly reinvestment rates are lower when funds are generated by the mark to market of the futures contract. Consequently the mark to market feature of the futures contract will not be preferred by a typical investor.
4) The correct answer was A!
The price of an FRA is expressed as a forward interest rate. A 3 x 9 FRA is a 180-day loan, 90 days from now. The current annualized 90-day money market rate is 3.5 percent and the 270-day rate is 4.5 percent. The actual (unannualized) rates on the 90-day loan (R90) and the 270-day loan (R270) are:
R90 = 0.035 x (90/360) = 0.00875
R270 = 0.045 x (270/360) = 0.03375
The actual forward rate on a loan with a term of 180 days to be made 90 days from now (written as FR (90, 180)) is:
Annualized = 0.02478 x (360/180) = 0.04957 or 4.96%.
5) The correct answer was C!
The value of the FRA at maturity is paid in cash. If interest rates increase then the party with the long position will receive a payment from the party with a short position. If interest rates decline the reverse will be true. The annualized 180-day loan rate is 4.96 percent. Given that annualized interest rates for a 180-day loan 90 days later are expected to drop to 4.2 percent, a cash payment will be made from the party with the long position to the party with the short position. The payment is given by:
The present value of the FRA at settlement is:
38,000 / [1+ (.042 x 180/360)] = 38,000 / 1.021 = $37,218