FRM一级模考

FRM一级模拟题
1 . Marking-to-market on a futures contract that is long in London and short in Chicago .can be handled by which of the following?
I Recording the close price in both locations.
II Recording market prices at the same instant, regardless of time zones.
III Recording market prices at the same local time in both locations.
IV Forecasting the London price at 4 p.m. Chicago time
A. I or II
B. II or IV
C. I, II or IV
D. I, II, III or IV
Answer: B
Answers I and III are incorrect because this would mean pricing was determined at different times. II would be the most correct and IV, while not ideal would at least include an evaluation of all information available to the market at that time.
2 . From the point of view of a company that uses derivatives to hedge foreign exchange risk, the main advantage of futures contracts over forward contracts is that:
A. Futures are typically available for longer maturities.
B. Futures are less standardized
C. Futures have less credit risk due to marking-to-market".
D. Futures usually have smaller notional amounts.
Answer: C
The mark-to-market feature of a futures contract requires each side to settle up every day, which reduces the credit risk of the transaction. Futures are usually available for shorter maturities, are more standardized。

3 . Roger Nelkin, an investment manager, currently manages a diversified portfolio that has a mark-to-market value of $140,000,000 and a beta of l.2. Given his recent performance, Roger expects an inflow of another $50,000,000 into his fund but is concemed that the stock market may rise sharply over the next few weeks forcing him to purchase stock at unreasonably high levels. To cover this exposure, Roger buys 25 S&P 500 futures contracts at a price of l,400. Each contract is worth 250 times the index. However, over the horizon of this hedge, the futures rise by 50 points but Roger receives only $10,000,000 in new money. What is the cash flow from the hedged position?
4 . John Doe, CFA, believes that he has found an arbitrage opportunity in the gold market based on the information that is shown below.
Spot price for gold = $285/oz.
Price for gold futures expiring in l year = $290.
Annual risk-free interest rate = 4.00%
What is the arbitrage profit ignoring transaction and storage costs?
A. 0.00
B. 6.40 '
C. 8.21
D. 9.95
Answer: B
The no-arbitrage condition requires that: F = S×(l + C). In this case, the futures price (F) is $290.
But the spot price (S) plus the cost of carry (S×C) is $296.40= [$285×(l + 4%)].
To exploit this arbitrage the trader would:
Buy gold futures at $290
Short sell gold in the spot market at $285.00
Deposit the proceeds for one year to earn $11 .40=285x0.04.
Thus the net profit = $285 + $11.40 - $290 = $6.40.
5 . An investor is bullish on the management of Golden Mining Co. but not its main product i.e. gold. What is the best strategy for this investor?
A. Buy Golden Mining shares and sell gold futures.
B. Sell Golden Mining shares and buy gold futures.'
C. Buy Golden Mining shares and sell shares in another gold mining firm.
D. Sell Golden Mining shares and buy shares in another gold mining firm.
Answer: A
Buying shares in Golden Mining and selling the gold future creates pure exposure to its management. (Selling shares in another mining firm instead of futures creates short position on that firm's management)。