Test Bank Hull: Options, Futures, and Other
Derivatives, Ninth Edition Chapter 5:
Determination of Forward and Futures Prices.
Comprehensive 100% Verified Multiple
Questions and Answers.
Latest Updated 2024/2025
, Test Bank Hull: Options, Futures, and Other
Derivatives, Ninth Edition Chapter 5:
Determination of Forward and Futures Prices.
Comprehensive 100% Verified Multiple
Questions and Answers.
Latest Updated 2024/2025
1. Which of the following is a consumption asset?
A. The S&P 500 index
B. The Canadian dollar
C. Copper
D. IBM stock
Answer: C
A, B, and D are investment assets (held by at least some investors purely for investment
purposes). C is a consumption asset.
2. An investor shorts 100 shares when the share price is $50 and closes out the position six months
later when the share price is $43. The shares pay a dividend of $3 per share during the six
months. How much does the investor gain?
A. $1,000
B. $400
C. $700
D. $300
Answer: B
The investor gains $7 per share because he or she sells at $50 and buys at $43. However, the
investor has to pay the $3 per share dividend. The net profit is therefore 7−3 or $4 per share.
100 shares are involved. The total gain is therefore $400.
3. The spot price of an investment asset that provides no income is $30 and the risk-free rate for all
maturities (with continuous compounding) is 10%. What is the three-year forward price?
A. $40.50
B. $22.22
C. $33.00
D. $33.16
Answer: A
The 3-year forward price is the spot price grossed up for 3 years at the risk-free rate. It is 30e0.1×3
=$40.50.
4. The spot price of an investment asset is $30 and the risk-free rate for all maturities is 10% with
continuous compounding. The asset provides an income of $2 at the end of the first year and at
the end of the second year. What is the three-year forward price?
A. $19.67
Derivatives, Ninth Edition Chapter 5:
Determination of Forward and Futures Prices.
Comprehensive 100% Verified Multiple
Questions and Answers.
Latest Updated 2024/2025
, Test Bank Hull: Options, Futures, and Other
Derivatives, Ninth Edition Chapter 5:
Determination of Forward and Futures Prices.
Comprehensive 100% Verified Multiple
Questions and Answers.
Latest Updated 2024/2025
1. Which of the following is a consumption asset?
A. The S&P 500 index
B. The Canadian dollar
C. Copper
D. IBM stock
Answer: C
A, B, and D are investment assets (held by at least some investors purely for investment
purposes). C is a consumption asset.
2. An investor shorts 100 shares when the share price is $50 and closes out the position six months
later when the share price is $43. The shares pay a dividend of $3 per share during the six
months. How much does the investor gain?
A. $1,000
B. $400
C. $700
D. $300
Answer: B
The investor gains $7 per share because he or she sells at $50 and buys at $43. However, the
investor has to pay the $3 per share dividend. The net profit is therefore 7−3 or $4 per share.
100 shares are involved. The total gain is therefore $400.
3. The spot price of an investment asset that provides no income is $30 and the risk-free rate for all
maturities (with continuous compounding) is 10%. What is the three-year forward price?
A. $40.50
B. $22.22
C. $33.00
D. $33.16
Answer: A
The 3-year forward price is the spot price grossed up for 3 years at the risk-free rate. It is 30e0.1×3
=$40.50.
4. The spot price of an investment asset is $30 and the risk-free rate for all maturities is 10% with
continuous compounding. The asset provides an income of $2 at the end of the first year and at
the end of the second year. What is the three-year forward price?
A. $19.67
