# Test On Derivatives For CFA Level 1

10 Questions | Total Attempts: 3961

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There are 10 questions in this test from the Derivatives section of the CFA Level 1 syllabus. You will get 15 minutes to complete the test.

• 1.
What are the minimum values of an American-style and a European-style 3-month call option with a strike price of \$90 on a non-dividend-paying stock trading at \$96 if the risk-free rate is 3%?
• A.

American: \$6.00, European: \$6.00

• B.

American: \$6.00, European: \$5.62

• C.

American: \$6.62, European: \$6.62

• 2.
If the owner of a call option with a strike price of \$35 finds the stock to be trading for \$42 at expiration, then the option:
• A.

Expires worthless

• B.

Will not be exercised

• C.

Is worth \$7 per share

• 3.
An agreement by Microsoft to receive 6-month LIBOR & pay a fixed rate of 5% per annum every 6 months for 3 years on a notional principal of \$10 million. What is the net cash flow in period 3 if 6-month LIBOR at start of period 3 is 5.5%?
• A.

\$275,000

• B.

\$250,000

• C.

\$25,000

• 4.
What is the option buyer's total profit or loss per share if a call option is purchased for a \$5 premium, has a \$50 exercise price, and the stock is valued at \$53 at expiration?
• A.

(\$5)

• B.

(\$2)

• C.

\$3

• 5.
A 90-day T-Bill Future is quoted price at 98. Calculate the delivery price
• A.

\$98

• B.

\$980,000

• C.

\$995,000

• 6.
Which combination of positions will tend to protect the owner from downside risk?
• A.

• B.

Sell the stock and buy a call option

• C.

• 7.
Which of the following statements is true?
• A.

For both calls and puts an increase in the exercise price will cause an increase in the option price

• B.

For both calls and puts an increase in the time to maturity will cause an increase in the option price

• C.

For calls, but not for puts, an increase in the time to maturity will cause an increase in the option price

• 8.
An FRA settles in 30 days • \$1 million notional • Based on 90-day LIBOR • Forward rate of 5.5% • Actual 90-day LIBOR at settlement is 6.5% • Calculate the PV of the FRA
• A.

\$2,453

• B.

\$2,460

• C.

\$2,463

• 9.
European put-call parity says the difference in price for call options less put options, both with exercise price E and time to maturity T, is equal to the stock price:
• A.

Minus the future value of the exercise price

• B.

Plus the future value of the exercise price

• C.

Minus the present value of the exercise price

• 10.
Find lower bound for European call X = \$75, stock is trading at \$73, RFR = 5%, 3 months expiry
• A.

\$3.5

• B.

\$3.8

• C.

\$3.9

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