Ejercicios resueltos – Derivados 1

1. A stock is currently priced at $30 and is expected to pay a dividend of $0.30 20 days and
65 days from now. The contract price for a 60-day forward contract when the interest rate is
5% is closest to:
A. $29.46.
B. $29.70.
C. $29.94.
1. C The dividend in 65 days occurs after the contract has matured, so it’s not relevant to
computing the forward price.

2. After 37 days, the stock in Question 1 is priced at $21, and the risk-free rate is still
5%. The value of the forward contract on the stock to the short position is:
A. –$8.85.
B. +$8.85.
C. +$9.00.

3. The forward price of a 200-day stock index futures contract when the spot index is 540,
the continuous dividend yield is 1.8%, and the continuously compounded risk-free rate is
7% (with a flat yield curve) is closest to:
A. 545.72.
B. 555.61.
C. 568.08.
3. B Use the dividend rate as a continuously compounded rate to get:

4. An analyst who mistakenly ignores the dividends when valuing a short position in a
forward contract on a stock that pays dividends will most likely:
A. overvalue the position by the present value of the dividends.
B. undervalue the position by the present value of the dividends.
C. overvalue the position by the future value of the dividends.

4. B The value of the long position in a forward contract on a stock at time t is:

If the dividends are ignored, the long position will be overvalued by the present value of the
dividends; that means the short position (which is what the question asks for) will be
undervalued by the same amount.
5. A portfolio manager owns Macrogrow, Inc., which is currently trading at $35 per share.
She plans to sell the stock in 120 days, but is concerned about a possible price decline. She
decides to take a short position in a 120-day forward contract on the stock. The stock will
pay a $0.50 per share dividend in 35 days and $0.50 again in 125 days. The risk-free rate
is 4%. The value of the trader’s position in the forward contract in 45 days, assuming in 45
days the stock price is $27.50 and the risk-free rate has not changed, is closest to:
A. $7.17.
B. $7.50.
C. $7.92.
5. A The dividend in 125 days is irrelevant because it occurs after the forward contract
matures.

1. A 6% Treasury bond is trading at $1,044 (including accrued interest) per $1,000 of face
value. It will make a coupon payment 98 days from now. The yield curve is flat at 5% over
the next 150 days. The forward price per $1,000 of face value for a 120-day forward contract,
is closest to:
A. $1,014.52.
B. $1,030.79.
C. $1,037.13.

1. B Remember that U.S. Treasury bonds make semiannual coupon payments, so:

The forward price of the contract is therefore:

FP (on a fixed income security)

1. The contract rate (annualized) for a 3 × 5 FRA if the current 60-day rate is 4%, the current
90-day rate is 5%, and the current 150-day rate is 6%, is closest to:
A. 6.0%.
B. 6.9%.
C. 7.4%.
1. C The actual (unannualized) rate on the 90-day loan is:

The actual rate on the 150-day loan is:

The price of the 3 × 5 FRA (the 60-day forward rate in 90 days) is:

2. The CFO of Yellow River Company received a report from the economics department that
states that short-term rates are expected to increase 50 basis points in the next 90 days. As
a floating rate borrower (typically against 90-day LIBOR), the CFO recognizes that he must
hedge against an increase in future borrowing costs over the next 90 days because of a
potential increase in shortterm interest rates. He considers many options, but decides on
entering into a long forward rate agreement (FRA). The 30-day LIBOR is 4.5%, 90-day
LIBOR is 4.7%, and 180-day LIBOR is 4.9%. To best hedge this risk, Yellow River should
enter into:
A. a 3 × 3 FRA at a rate of 4.48%.
B. a 3 × 6 FRA at a rate of 4.48%.
C. a 3 × 6 FRA at a rate of 5.02%.

2. C A 3 × 6 FRA expires in 90 days and is based on 90-day LIBOR, so it is the appropriate

hedge for 90-day LIBOR 90 days from today. The rate is calculated as:

1. Consider a U.K.-based company that exports goods to the EU. The U.K. company expects
to receive payment on a shipment of goods in 60 days. Because the payment will be in
euros, the U.K. company wants to hedge against a decline in the value of the euro against
the pound over the next 60 days. The U.K. risk-free rate is 3%, and the EU risk-free rate is
4%. No change is expected in these rates over the next 60 days. The current spot rate is
0.9230 £ per €. To hedge the currency risk, the U.K. company should take a short position
in a euro contract at a forward price of:
A. 0.9205.
B. 0.9215.
C. 0.9244.
B The U.K. company will be receiving euros in 60 days, so it should short the 60- day forward
on the euro as a hedge. The no-arbitrage forward price is:

1. Annualized LIBOR spot rates and the present value factors today are:

Based on a notional principal of $40,000,000, the annualized swap rate is closest to:
A. 1.27%.
B. 2.54%.
C. 5.08%.

Use the following information to answer Questions 2 and 3.

Two parties enter into a 2-year fixed-for-floating interest rate swap with semiannual
payments. The floating-rate payments are based on LIBOR. The 180-, 360-, 540-, and 720-
day annualized LIBOR rates and present value factors are:
2. The swap rate is closest to:
A. 6.62%.
B. 6.87%.
C. 7.03%.

3. After 180 days, the swap is marked-to-market when the 180-, 360-, and 540-day
annualized LIBOR rates are 4.5%, 5%, and 6%, respectively. The present value factors,
respectively, are 0.9780, 0.9524, and 0.9174. What is the market value of the swap per $1
notional principal, and which of the two counterparties (the fixed-rate payer or the fixed-rate
receiver) would make the payment to mark the swap to market?

Use the following data to answer Questions 1 and 2.

An investor has an asset that is currently worth $500, and the continuously compounded
risk-free rate at all maturities is 3%.
1. Which of the following is the closest to the no-arbitrage price of a 3-month forward
contract?
A. $496.26.
B. $500.00.
C. $502.00.
D. $503.76.

2. If the asset pays a continuous dividend of 2%, which of the following is the closest to the
no-arbitrage price o f a 3-month forward contract?
A. $494.24.
B. $498.75.
C. $501.25.
D. $506.29.

3. A bond pays a semiannual coupon of $40 and has a current value of $1,109. The next
payment on the bond is in four months and the interest rate is 6.50%. Using the continuous
time model, the price o f a 6-month forward contract on this bond is closest to:
A. $995.62.
B. $1,011.14.
C. $1,035.65.
D. $1,105.20.

4. The owner of 300,000 bushels of corn wishes to hedge his position for a sale in 150 days.
The current price of corn is $1.50/bushel and the contract size is 5,000 bushels. The interest
rate is 7%, compounded daily. The storage cost for the corn is $18/day. Assume the cost of
storage as a percentage of the contract per year is 1.46%. The price for the appropriate
futures contract used to hedge the position is closest to:
A. $6,635-
B. $7,248.
C. $7,656.
D. $7,765.

5. Backwardation refers to a situation where:

A. spot prices are above futures prices.
B. spot prices are below futures prices.
C. expected future spot prices are above futures prices.
D. expected future spot prices are below futures prices.

4. Assume an investor is about to deliver a short bond position and has four options to
choose from which are listed in the following table. The settlement price is $92.30 (i.e., the
quoted futures price). Determine which bond is the cheapest-to-deliver.

A. Bond 1.
B. Bond 2.
C. Bond 3.
D. Bond 4.

4. A Cost of delivery:
Bond 1: 98 - (92.50 x 1.02) = $3.65
Bond 2: 122 - (92.50 x 1.27) = $4.53
Bond 3: 105 - (92.50 x 1.08) = $5.10
Bond 4: 112-(92.50 x 1.15) = $5.63
Bond 1 is the cheapest-to-deliver with a cost of delivery of $3.65.

3. Which of the following would properly transform a floating-rate liability to a fixed-rate

liability? Enter into a pay:
A. foreign currency swap.
B. fixed interest rate swap.
C. domestic currency swap.
D. floating interest rate swap.
3. B The fixed interest rate swap will allow for the conversion of a floating-rate liability to a
fixed-rate liability.

4. Use the following information to determine the value of the swap to the floating rate payer
using the bond methodology. Assume we are at the floating rate reset date.
• $ 1 million notional value, semiannual, 18-month maturity.
• Spot LIBOR rates: 6 months, 2.6%; 12 months, 2.65%; 18 months, 2.75%.
• The fixed rate is 2.8%, with semiannual payments.
A. —$66.
B. $476.
C. $3,425.
D. $5,077.