Concept: These on-line quiz questions are not specifically linked to AIMs, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical AIM-by-AIM question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are well-suited to online simulation.
Questions:
408.1. The spot price of silver is $20.00 per ounce. The storage cost is $3.00 per ounce per year payable quarterly in arrears. The risk-free interest rate is flat at 3.0% per annum with continuous compounding. Further, you have determined that the owning silver confers a convenience yield of 0.20% (20 basis points) per month with continuous compounding. Which is nearest to the theoretical futures price of silver for delivery in six months?
a. $19.83
b. $20.79
c. $21.55
d. $23.09
408.2. The spot price of the Euro is USD $1.280 per 1.0 EUR; i.e., EUR/USD = $1.280 where EUR is the base currency and USD is the quote currency. Risk-free interest rates are flat for all maturities, with continuous compounding: 1.00% for USD and 3.00% for EUR. Which is nearest to the theoretical four-year EUR/USD forward exchange rate ?
a. EUR/USD 0.983 ($0.983 per one EUR)
b. EUR/USD 1.182 ($1.182 per one EUR)
c. EUR/USD 1.307 ($1.307 per one EUR)
d. EUR/USD 1.559 ($1.559 per one EUR)
408.3. The spot price of oil is $100.00 per barrel and the one-year futures price is $98.22 per barrel. Storage costs is 3.00% per annum and the risk-free rate is 1.20% per annum, both with continuous compounding. Which is nearest to the implied convenience yield?
a. -2.38%
b. zero
c. +1.75%
d. +6.00%
Answers here:
Questions:
408.1. The spot price of silver is $20.00 per ounce. The storage cost is $3.00 per ounce per year payable quarterly in arrears. The risk-free interest rate is flat at 3.0% per annum with continuous compounding. Further, you have determined that the owning silver confers a convenience yield of 0.20% (20 basis points) per month with continuous compounding. Which is nearest to the theoretical futures price of silver for delivery in six months?
a. $19.83
b. $20.79
c. $21.55
d. $23.09
408.2. The spot price of the Euro is USD $1.280 per 1.0 EUR; i.e., EUR/USD = $1.280 where EUR is the base currency and USD is the quote currency. Risk-free interest rates are flat for all maturities, with continuous compounding: 1.00% for USD and 3.00% for EUR. Which is nearest to the theoretical four-year EUR/USD forward exchange rate ?
a. EUR/USD 0.983 ($0.983 per one EUR)
b. EUR/USD 1.182 ($1.182 per one EUR)
c. EUR/USD 1.307 ($1.307 per one EUR)
d. EUR/USD 1.559 ($1.559 per one EUR)
408.3. The spot price of oil is $100.00 per barrel and the one-year futures price is $98.22 per barrel. Storage costs is 3.00% per annum and the risk-free rate is 1.20% per annum, both with continuous compounding. Which is nearest to the implied convenience yield?
a. -2.38%
b. zero
c. +1.75%
d. +6.00%
Answers here:
