Professional Documents
Culture Documents
3 parts exam
Part A
Answer all 20 questions. Each question is worth 0.5 marks. Total mark
for this section is 10 (20*0.5) marks.
Example:
1. If the forward points are _______at a specific date, the base currency
is at a _______.
Correct answer is B.
Part B
Choose any Three (3) analytical questions from this section. All
questions in this section have equal marks. Each answer is worth of 10
marks. Total mark for this section is 30 (3*10) marks.
1
Part C
Choose any ONE (1) essay question from this section. All questions in
this section have equal marks. Each answer is worth of 10 marks.
Total mark for this section is 10 (1*10) marks.
A. Wholesale markets
B. Secondary markets
D. Capital market
2. An option that gives the option buyer the right to buy the commodity
or financial instrument specified in the contact at the exercise price is
called:
A. an American option
B. a European option
C. a call option
D. a put option
2
Topics:
Derivative markets: Call option, put option, long position, short position,
American option, European option
Part B:
Example:
A superannuation fund is holding a large number of National Bank Limited shares in an
investment portfolio and wishes to protect the value of the investment. The National Bank
Limited shares currently trade at $34.49. The superannuation fund buys a put option with
an exercise price of $34.00 per share and a premium of $0.95 per share.
(b) By entering into this option strategy, explain whether the superannuation fund will
exercise the option if the spot price is above or below the exercise price. (2 marks)
3
(c) Explain the differences between American-type options and European-type options.
(2 marks)
(d) Draw a fully labelled diagram of the put option showing the profit and loss
profile of the option buyer and the writer of the option (including the break-
even price). (4 marks)
Topics:
5. Define option and explain the premium and the exercise price
profit and loss profile of call and put option both from buyers and
sellers point of view.
Part C
Example:
4
Topics: