Quiz 2 – 1 PM

5 Sep 2023
1. Describe the 3-step central clearing process for interest rate swaps.

2. Assume Ann enters into a contract to buy 5 grams of gold at $50

per gram after 90 days. The futures price is $52. At the end of day
1, the futures price is $54. A) What adjustment will be made to
Ann’s account at the end of day? B) If this were a forward account,
what adjustment would be made?

3. Draw the payoff and profit diagram for a long call position given
the following: Exercise price = 20, call option premium = 2. Clearly
label the maximum loss and the break-even point.
Quiz 2 – 2:30 PM
5 Sep 2023
1. Draw the payoff diagram for short forward position where the
forward price 20.

2. Draw the payoff and profit diagram for a short call position given
the following: Exercise price = 20, call option premium = 2. Clearly
label the maximum loss and the break-even point.

3. Under what situation would an investor prefer a short forward

position over a short-call position?