Module 5 Honors Quiz :Honors Assignments (Financial Markets) Answers 2025

Question 1

What is the forward exchange rate in this case?

✅ 104.76 yen to dollars
❌ 95.45 yen to dollars
❌ 105.12 yen to dollars
❌ 94.88 yen to dollars

Explanation:
This uses covered interest parity.

• Borrow $1 at 5% → must repay $1.05

• Convert to yen: $1 = ¥100

• Invest in Japan at 10% → ¥110 after 1 year

• Forward rate = ¥110 / $1.05 ≈ ¥104.76 per dollar

Question 2

Why is it difficult to determine the spot price of oil?

❌ Oil depends heavily on politics.
✅ Oil is primarily sold in long-term contracts, so there is no clear spot price.
❌ Oil is traded privately.
❌ Oil cannot be stored efficiently.

Explanation:
Most oil transactions happen through long-term contracts, making a single, clear spot price hard to observe.

Question 3

Predicted share price using put-call parity (no interest):

✅ 30.45

Explanation:
Put–Call Parity (with no interest):

$$C-P=S-K$$

So,

$$S=C-P+K=6.10-2.65+27=30.45$$

✅ Final Answers Summary