Question 1:
Describe how a party can terminate a forward transaction prior to maturity?
Question 2:
Consider a forward Rate Agreement that:
• Expires in 30 days
• Is based upon a notional principal amount of Rs 10,000,000
• Is based upon a 90-day LIBOR.
• Specifies the forward rate of 5%.
Suppose that the actual 90-day LIBOR 30 days from now (at expiration) is 8%. Evaluate the cash settlement payment at expiration, and recognize which party makes the payment.
Question 3:
Florida Exports expects to get EUR 50 million three months from now and enters in a cash settlement currency forward to exchange these euros for U.S. dollars at USD 1.23 per euro. If market exchange rate is USD 1.25 per euro at settlement, what is the amount of payment to be received or paid by Florida Exports?
Question 4:
Describe the various risk management methods adopted by the Stock Exchange of Mauritius in their employ of index futures.
Question 5:
Describe the benefits acquired from using futures market for both individual and institutional investors.