Money, Banking, and International Finance- A farmer bought 100 put options for corn. Strike price of corn equals $5 per bushel; the
option premium is $0.01 per bushel, and each contract specified a quantity of 100 bushels.
Calculate the farmer’s premium, and whether he will exercise this option if the market price
of corn equals $6 per bushel? - Can you identify any problems for a finance company to issue derivatives that are not based
on a commodity, but on a stock market index? - What are Credit Default Swaps (CDS)?
- Could the Federal Reserve or U.S. government have prevented the 2008 Financial Crisis?
- Company XYZ enters into a 5-year swap agreement with a dealer, and four years have
passed. Payments are semi-annual, and two payments are left. Swap's face values are $100
million and 110 million euros with a coupon interest of 3% for U.S. dollars and 4% for the
euros. Current discount rates are 5% APR for the U.S. and 6% APR in Europe while the
current spot exchange is St = $1.2 / euro. Calculate the swap's present value.