Paper One.......
Suppose saad has purchased a contract that si giving him right to sell the 200 shares of ABC Company at $12 on 30th September, 2011, Saad has paid $20 to seller of the contract to get the right to sell the shares.
1- You are required to identify the type of option contract (call or put) in this situation.
2- What is the option premium in this contract?
3- If the market price of the contract on 30th September, 2011 is $10, what will be the profit for the option holder if he exercises it? (5)
1- Suppose you want to purchase food for dinner from a restaurant.
2- You are dealing in Ice Cream manufacturing and you have to purchase milk on regular basis from a nearby milkman.
What type of market (derivative or spot) will be suitable for each situation? Give reasoning to support your answer. (5)
1- Deposit Rs. 10,000 in an account which is paying 15% annual payments for 4 years.
2- Deposit Rs. 10,000 in an account which is paying 15% semi-annual payments for 4 years.
Calculate the future value for both given options. Which option you would select and why?(5)
Capital Market Line and Security Market Line both are used to determine the relationship between expected return and risk then what is the difference between the two? (3)
Identify the type of risk; investors are exposed to in each investment alternative. Justify your answer.
Purchasing a treasury security that matures in one year versus purchasing a treasury security that matures in 30 Years. (3)
Paper Two
Total Objective 56
Total Subjective 8
These are the subjective Questions which I attempted in my paper
1. What is mean by speculation?
2. What is meant by NAV?
3. What is meant by real and nominal interest rate?
4. Define covariance. How does it shows?
5. Explain the role of OCC (Option Clearing Corporation) in option market?
6. What is compound interest? How it can be calculated?
7. Differentiate between third and fourth market?
8. Can risk be eliminated by adding more and more stock in portfolio? Justify your answer?
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