SOA IFM Exam Questions and
Answers 100% Pass
Haircut - ✔✔Additional collateral places with the lender by the short seller, belonging
to the short seller
Short Rebate - ✔✔Interest earned by the short seller
Lease Rate - ✔✔Payment made to the lender due to the opportunity cost of dividends
lost
Physical settlement - ✔✔Long position pays short position and short position delivers X
shares in the form of a stock certificate
Cash Settlement - ✔✔Short position pays long position their profit earned, or vice versa
Fully Leveraged Purchase - ✔✔Receive at time 0, pay at time T
Cash and Carry - ✔✔Actual forward price > theoretical price
Should short the forward, long a stock and borrow
Reverse Cash and Carry - ✔✔Actual forward price < theoretical price
100% Pass Guarantee Katelyn Whitman All Rights Reserved © 2025 1
,Should long the forward, short the stock and lend money
Futures contract - ✔✔A standardized agreement to trade in the future in which buyers
and sellers post a margin and the contract is marked to market
Customizing Forward vs Future - ✔✔Forward is customizable, future is standardized
Settlement forward vs future - ✔✔Forward settled at expiration
Future has gain/loss settled frequently as it is marked to market
Credit risk forward vs futures - ✔✔Forward has more credit risk
Future has less because gain and loss don't accumulate
Liquidity forward vs future - ✔✔Forward not liquid
Future are liquid as they are exchange traded
Pricing limit forward vs future - ✔✔Forward no pricing limit
Future have pricing limit
Notional amount - ✔✔The dollar value of the assets underlying one contract
Stock owner floor - ✔✔Invest in option to protect against price decline
Floor = long asset + long put = long call + long bond
Stock short seller floor - ✔✔Invest in option that guarantees you pay at most K
100% Pass Guarantee Katelyn Whitman All Rights Reserved © 2025 2
,Cap = short asset + long call = long put + short bond
Covered call - ✔✔Long asset so payoff increases as stock price increases
CC = short call + long asset = short put + long bond
Covered put - ✔✔Short asset so payoff increases as stock price decreases
CP = short put + short asset = short call + short bond
Spread - ✔✔Position that consists of either all calls or all puts but not both
Bull Spread - ✔✔Long K1 + Short K2
Bear Spread - ✔✔Short K1 + Long K2
Box spread - ✔✔Call bull + put bear = long bond = lend
Put Bull + call bear = short bond = borrow
Ratio spread - ✔✔Long m K1, short n K2
Collar - ✔✔Long Put K1 + Short Call K2
Collared Stock - ✔✔Long collar + long stock
Looks like bull spread
Straddle - ✔✔Long call K + long put K
Strangle - ✔✔Long call K1 + long put K2
100% Pass Guarantee Katelyn Whitman All Rights Reserved © 2025 3
, Symmetric butterfly - ✔✔Long K1 + 2 short K2 + long K3
Asymmetric Butterfly - ✔✔(K3-K2)Long K1 + (K3-K1)Short K2 + (K2-K1)Long K3
Put Call Parity - ✔✔C - P = Fp(S) - Fp(K)
Call bounds European - ✔✔Fp(S) - Fp(K) < c < Fp(S)
Call bounds american - ✔✔S-K < c < S
Put bounds european - ✔✔Fp(K) - Fp(S) < p < K
Put bounds american - ✔✔K-S < p < K
When is early exercising rational for a call - ✔✔Pv(dividends) > pv(interest on strike) +
implicit put
When is early exercising rational for a put - ✔✔Pv(interest) > pv(dividends) + implicit
call
Strike price effect CALL - ✔✔C(k1) - c(K2) < K2 - k1
Strike price effects on put - ✔✔P(K2) - p(k1) < K2 - k1
Time effect on C and P - ✔✔C(t1) < c(t2)
No arbitrage condition of u and d - ✔✔D < e^(r-delta) < u
Delta - ✔✔Measures sensitivity of options price to underlying assets price
100% Pass Guarantee Katelyn Whitman All Rights Reserved © 2025 4
Answers 100% Pass
Haircut - ✔✔Additional collateral places with the lender by the short seller, belonging
to the short seller
Short Rebate - ✔✔Interest earned by the short seller
Lease Rate - ✔✔Payment made to the lender due to the opportunity cost of dividends
lost
Physical settlement - ✔✔Long position pays short position and short position delivers X
shares in the form of a stock certificate
Cash Settlement - ✔✔Short position pays long position their profit earned, or vice versa
Fully Leveraged Purchase - ✔✔Receive at time 0, pay at time T
Cash and Carry - ✔✔Actual forward price > theoretical price
Should short the forward, long a stock and borrow
Reverse Cash and Carry - ✔✔Actual forward price < theoretical price
100% Pass Guarantee Katelyn Whitman All Rights Reserved © 2025 1
,Should long the forward, short the stock and lend money
Futures contract - ✔✔A standardized agreement to trade in the future in which buyers
and sellers post a margin and the contract is marked to market
Customizing Forward vs Future - ✔✔Forward is customizable, future is standardized
Settlement forward vs future - ✔✔Forward settled at expiration
Future has gain/loss settled frequently as it is marked to market
Credit risk forward vs futures - ✔✔Forward has more credit risk
Future has less because gain and loss don't accumulate
Liquidity forward vs future - ✔✔Forward not liquid
Future are liquid as they are exchange traded
Pricing limit forward vs future - ✔✔Forward no pricing limit
Future have pricing limit
Notional amount - ✔✔The dollar value of the assets underlying one contract
Stock owner floor - ✔✔Invest in option to protect against price decline
Floor = long asset + long put = long call + long bond
Stock short seller floor - ✔✔Invest in option that guarantees you pay at most K
100% Pass Guarantee Katelyn Whitman All Rights Reserved © 2025 2
,Cap = short asset + long call = long put + short bond
Covered call - ✔✔Long asset so payoff increases as stock price increases
CC = short call + long asset = short put + long bond
Covered put - ✔✔Short asset so payoff increases as stock price decreases
CP = short put + short asset = short call + short bond
Spread - ✔✔Position that consists of either all calls or all puts but not both
Bull Spread - ✔✔Long K1 + Short K2
Bear Spread - ✔✔Short K1 + Long K2
Box spread - ✔✔Call bull + put bear = long bond = lend
Put Bull + call bear = short bond = borrow
Ratio spread - ✔✔Long m K1, short n K2
Collar - ✔✔Long Put K1 + Short Call K2
Collared Stock - ✔✔Long collar + long stock
Looks like bull spread
Straddle - ✔✔Long call K + long put K
Strangle - ✔✔Long call K1 + long put K2
100% Pass Guarantee Katelyn Whitman All Rights Reserved © 2025 3
, Symmetric butterfly - ✔✔Long K1 + 2 short K2 + long K3
Asymmetric Butterfly - ✔✔(K3-K2)Long K1 + (K3-K1)Short K2 + (K2-K1)Long K3
Put Call Parity - ✔✔C - P = Fp(S) - Fp(K)
Call bounds European - ✔✔Fp(S) - Fp(K) < c < Fp(S)
Call bounds american - ✔✔S-K < c < S
Put bounds european - ✔✔Fp(K) - Fp(S) < p < K
Put bounds american - ✔✔K-S < p < K
When is early exercising rational for a call - ✔✔Pv(dividends) > pv(interest on strike) +
implicit put
When is early exercising rational for a put - ✔✔Pv(interest) > pv(dividends) + implicit
call
Strike price effect CALL - ✔✔C(k1) - c(K2) < K2 - k1
Strike price effects on put - ✔✔P(K2) - p(k1) < K2 - k1
Time effect on C and P - ✔✔C(t1) < c(t2)
No arbitrage condition of u and d - ✔✔D < e^(r-delta) < u
Delta - ✔✔Measures sensitivity of options price to underlying assets price
100% Pass Guarantee Katelyn Whitman All Rights Reserved © 2025 4
