6. A company buys 10 contracts for petroleum that specifies a price of $75 per barrel. Each contract specifies 1,000 barrels. Who pays and how much into the margin account if the price of petroleum shoots up to $150 per barrel?
7. An investor buys a currency futures contract for $1 = 1.5 euros from a bank for 150,000 euros. Who pays and how much into a margin account if the exchange rate changes to $1 = 1 euro?
8. Distinguish between a futures and options contract.
10. Which factors determine the value of an option's premium?
11. You are holding 10 call options for petroleum with a strike price of $75 per barrel. Option premium equals $0.5 per barrel, and each contract specified a quantity of 1,000 barrels. Compute the premium, and whether you will exercise this option if the market price is $50 per barrel?
12. A farmer bought 100 put options for corn. Strike price of corn equals $5 per bushel; the option premium is $0.01 per bushel, and each contract specified a quantity of 100 bushels. Calculate the farmer's premium, and whether he will exercise this option if the market price of corn equals $6 per bushel?
13. Can you identify any problems for a finance company to issue derivatives that are not based on a commodity, but on a stock market index?
15. Could the Federal Reserve or U.S. government have prevented the 2008 Financial Crisis?
16. Company XYZ enters into a 5-year swap agreement with a dealer, and four years have passed. Payments are semi-annual, and two payments are left. Swap's face values are $100 million and 110 million euros with a coupon interest of 3% for U.S. dollars and 4% for the euros. Current discount rates are 5% APR for the U.S. and 6% APR in Europe while the current spot exchange is St = $1.2 / euro. Calculate the swap's present value.