Reference no: EM131318177

GFGB: Global Financial Markets

Graduate School of Business

Fordham University

N. K. Chidambaran

Sample Questions

The questions below are not meant to be indicative of the types of questions I tend to use in an exam.  It is not meant to be comprehensive and cover all material discussed in class.  Please refer to class notes for the material coverage in class.  No solutions will be posted for these questions.  Please see me in my office if you require clarifications.

(1) Calculate the futures price in each of the following cases.  Assume that the interest rates are continuously compounded rates.

a) What is the 1-year $/Euro futures price given the following date:

S = $1.00/Euro

T = 3 months

r($) = 2%

r(Euro) = 4%

b) What is the 1-year gold futures price given the following date:

S = $1,200/oz

T = 6 months

r = 2%

c) What is the 1-year Soyabean futures price given the following date:

S = $8.6 /bushel

T = 3 months

r = 2%

Carrying cost = 0.05%

(2) Explain why expectations of future exchange rates do not have a role to play in determining the futures price for gold. (Note: This holds for all assets).

(3) Give two examples and explain of how options can be used if an investor is bullish on a stock.

(4) Describe the cash flows to a short futures contract. Give an example.

(5) Explain the role of directors in the management of a modern multinational firm.  What are some of the decisions that directors can be expected to take.

(6) FinTech is an important development in Financial Markets.  Using the Lending Club case ad an example, describe the promise and pitfalls of FinTech.

(7) It is often argued that using Equity based pay for CEOs can resolve the conflicts between management and shareholders.  Explain the logic behind this.  Do you see any disadvantages to using stocks and options to compensate executives?

(8) Describe the operations of a bank.  Describe some of the competition banks face that can reduce bank profits.

(9) What is deposit insurance?  What are the advantages and disadvantages of deposit insurance?

(10) Companies such as prosper.com and lendingclub.com promise to provide investors an opportunity to make higher returns than putting their money in bank deposits.  Can you provide reasons why lending through lending club results in higher returns for the investor?

(11) Derivatives are used for hedging.  Explain how an airline can hedge the cost of fuel using different types of derivative contracts.  Which is your preferred hedging strategy.

(12) What is the Black-Scholes value of an at-the-money 3-month call option on Apple?  The stock price of Apple is $112, it has a dividend yield of 2%, and its volatility is 30%.  Assume that the 3-month interest rate is 0.5%.

(13) Explain how investment banks differ from retail banks.  Explain the process of book-building in the context of an IPO.

(14) What is IPO underpricing?  Can you give some reasons why IPOs are underpriced?