MID TERM TEST

Faculty of Business

Course :
BBCF3153
Financial Derivatives

Date : 23 July 2020

Time : 12.00 nn – 3.00 pm

Module Lecturer : Ruzanna Ramli

Total marks : 50 marks (worth 20%)

Instructions to candidates:

1. Write your detail information on the Mid Term Paper.

2. Answer questions according to the instruction for each section.

3. Please submit in LMS portal within the stipulated time in Microsoft Word format.

4. Rename your file as 202005_BBCF3153_Your name.

Materials allowed for this examination:

1. Non-programmable calculator.

DO NOT REMOVE ANY PART OF THIS TEST PAPER FROM THE EXAMINATION ROOM

Student ID : 201703020024

Student Name : Tebashini a/p Annahdurai

NIRC/Passport No : 990404-14-5894

Program : BOSAF
Date : 23 July 2020 Course :BBCF3153 Financial Derivatives

SECTION A – MULTIPLE CHOICE QUESTIONS [TOTAL = 30 MARKS]

Answer ALL questions. You have to highlighted the correct answer.

1. A contract that requires the investor to sell securities on a future date is called

A. short contract.
B. long contract.
C. hedge.
D. micro hedge.

2. In Malaysia, derivative is traded in

A. Bursa Malaysia Derivatives Berhad

B. NYSE
C. Chicago Merchandise Exchange
D. S&P 500

3. Forward Future _____X______ Swap. What is X?

A. Option
B. Share.
C. Bond
D. Derivatives

4. The forward price is RM45, while the spot price is RM41. What is the price pay during
the maturity?

A. RM45
B. RM41
C. RM42
D. RM47

5. “Exchange of fixed interest payment with variable interest payment or vice versa”

The above statement refers to:

A. interest rate swap.

B. currency swap.
C. bond swap.
D. option swap.

6. FTSE Bursa Malaysia KLCI is composed of the __________ largest companies on the
Bursa Malaysia.

A. 50
B. 40
C. 30
D. 60

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Date : 23 July 2020 Course :BBCF3153 Financial Derivatives

7. In May 2007, the Malaysian parliament consolidated three related acts; Securities
Industry Act 1983, Future Industry Act 1993 and part of the Securities Commission Act
1993 into a single act known as

A. Capital Market and Services Act, 2013

B. Capital Market and Services Act, 2019
C. Capital Market and Services Act, 2007
D. Capital Market and Services Act, 2000

8. Figure 1 shows the price of future contract should equal the spot price of the underlying
asset during the maturity. This concept refers to __________________.

Figure 1

A. difference.
B. similarity.
C. convergence.
D. mismatch

9. Ft,T=S0 (1+rf+c-y)t,T refers to

A. buy and carry model

B. pick and carry model
C. cost of carry model
D. none of above

10. Malaysia adopt _____________ for index construction.

A. equally weighted index

B. geometrical weighted index
C. value weighted index
D. None of above.

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Date : 23 July 2020 Course :BBCF3153 Financial Derivatives

11. Based on Figure 2, the price pattern between spot and future price refers to
______________.

Figure 2

A. normal backwardation.
B. convergence.
B. similarity.
C. difference.

12. Index multiplier of SIF contract is _______________.

A. RM50
B. RM60
C. RM70
D. RM80

13. The product of commodity derivatives traded in Bursa Malaysia Derivatives is

A. Crude Palm Oil Futures

B. 3 Month Kuala Lumpur Interbank Offered Rate Futures
C. FTSE Bursa Malaysia KLCI Options
D. Single Stock Futures

14. The underlying asset for Stock Index Futures (SIF) contracts is

A. FTSE Bursa Malaysia KLCI

B. GTSE Bursa Malaysia KLCI
C. HTSE Bursa Malaysia KLCI
D. ITSE Bursa Malaysia KLCI

15. Bursa Malaysia Derivatives Berhad owned by _______ Bursa Malaysia and ________
by Chicago Mercantile Exchange (CME).

A. 75%, 25%
B. 70%, 30%.
C. 60%, 40%.
D. 50%, 50%

SECTION B – STRUCTURED QUESTIONS [TOTAL = 20 MARKS]

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Date : 23 July 2020 Course :BBCF3153 Financial Derivatives

Answer ALL the questions in the space provided.

QUESTION 1 (10 MARKS)

You have gone long 10 September Crude Palm Kernel Oil futures contracts. The future price
is RM1,500 per ton. Given the following information, determine the daily marking-to-market
adjustment to both you and the counterparty account. (Assuming same total value)

 Contract size = 10 tons per contract

 Initial margin = 10 percent of total value
 Maintenance margin = 70 percent of initial margin

Future
Your account Balance Counterparty Balance
Day settlement
adjustment(RM) (RM) adjustment(RM) (RM)
price (RM)
0 2,000 IM= 15,000 15,000 IM= 15,000 15,000
RM 10 x 10 x10
1 2,010 = + 1,000 16,000 -1000 14,000

RM 30 x 10x 10
2 1,980 = - 3,000 13,000 + 3,000 17,000

RM 10 x 10x 10
3 1,970 = - 1,000 12,000 + 1,000 18,000

RM 20 x 10x 10
4 1,990 = + 2,000 14,000 -2,000 16,000

(10 marks)

Contract value = 10 x 10 x RM 1,500

= RM 150,000

Initial Margin = 0.10 x RM 150,000

= RM 15,000

Maintenance Margin = 0.70 x RM 15,000

= RM 10,500

QUESTION 2 (10 MARKS)

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Date : 23 July 2020 Course :BBCF3153 Financial Derivatives

Suppose there are four shares in the Index. Compute the index on t=2 and t=3 by using value
weighted index.

Share Number of stock Close Price Close Price on Close Price

outstanding on day t=1 day t=2 on day t=3
A 5,000 RM5.00 RM5.40 RM6.00
B 10,000 RM7.00 RM6.80 RM6.00
C 6,000 RM6.00 RM6.50 RM8.00
D 11,500 RM8.00 RM7.50 RM9.00

Index t=2 = 5,000(5.40) + 10,000(6.80) + 6,000(6.50) + 11,500(7.50) X 100

5,000(5.00) + 10,000(7.00) + 6,000(6.00) + 11,500(8.00)

= 220,250 X 100
223,000

= 98.77 points

Index t=3 = 5,000(6.00) + 10,000(6.00) + 6,000(8.00) + 11,500(9.00) X 100

5,000(5.40) + 10,000(6.80) + 6,000(6.50) + 11,500(7.50)

= 241,500 X 100
220,250

= 109.65 points

(10 marks)

-END OF QUESTIONS-
Thank you and good luck

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