Basics of Derivative Pricing and Valuation I

Which of the following is least likely a factor in the pricing of derivatives?

Which of the following does not represent a cost of holding an asset?

An investor who requires a premium to compensate for taking on risk is said to be:

Which of the following is least likely an example of replication?

ABC Corp entered into a short position in a forward contract. The spot price of the underlying is $100 at the initiation of the contract. The contract is for 6 months, and the current risk free rate is 4.05%. What should be the exercise price of the contract, using the risk-neutral pricing principle. Assume that there are no benefits and costs associated with holding the underlying.

ABC Corp entered into a short position in a forward contract. The spot price of the underlying is $100 at the initiation of the contract. The contract is for 6 months, and the current risk free rate is 4.05%. The exercise price of the contract is $102.

3 months after initiation, the spot price of the underlying rose to $102. What is the value of the contract to ABC corp at this point?
Assume that there are no benefits and costs associated with holding the underlying.

Linda anticipates that she would have receive a $1 million inheritance in 6 months. She has no use for the money, so she plans to lend it out for 1 year. She prefers to lock in the current LIBOR rate, as she fears that the LIBOR will decrease.

What is the most reasonable position that she should take?

Which of the following statements is most accurate?

ABC Corp entered into a short position in a forward contract. The spot price of the underlying is $100 at the initiation of the contract. The contract is for 6 months, and the current risk free rate is 4.05%. The exercise price of the contract is $102.

At expiration, the spot price of the underlying was $80. What is the value of the contract to ABC corp at expiration?

Which of the following statements is most accurate?