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Derivatives

CFA® Program Level I · Weight on the exam: 6–9 %.

Sample questions

1.

Ioana Vrânceanu, a rates analyst at Bucegi Bank, is pricing a new three-year plain-vanilla interest rate swap with annual settlement. Annual-compounding spot rates are 3.15% for one year, 3.70% for two years and 4.05% for three years. The fixed swap rate is closest to:

2.

Ottavia Brambilla wants the payoff of a long one-year European call option on shares of Valdorcia Pharma, which pay no dividends, with an exercise price of 80.00. Such calls trade rarely, but one-year European puts with an exercise price of 80.00 are liquid, and Brambilla can borrow and lend at the risk-free rate. According to put-call parity, which position most likely replicates one call?

3.

Efua Ansong, a cocoa exporter, and Mabrouk Confectionery agree today that in six months Ansong will deliver 200 tonnes of cocoa beans to Mabrouk at a price per tonne fixed now. Neither party pays anything at the outset. Which description of this contract is accurate?

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