1. The forward value at time t for a long forward contract initiated at time 0 is:

A. the future value of the difference in forward prices.

B. the present value of the difference in forward prices.

C. equal to the spot price at time t.

2. Assume an investor bought a one-year forward contract with price F0(T) = 110.

Six months later, at Time t = 0.5, the price of the stock is S0.5 = 115 and the

interest rate is 4%. The value of the existing forward contract expiring in six months will be *closest* to:

A. -7.

B. 5.

C. 7.

3. Suppose we are pricing a four-year Libor-based interest rate swap with annual resets

(30/360 day count). The estimated present value factors, are given in Table 1 below:

**Table 1**

Maturity (years) | Present Value factors |

1 | 0.9901 |

2 | 0.97787 |

3 | 0.9654 |

4 | 0.9385 |

The fixed rate of the swap is:

A. 1.5%.

B. 1.6%.

C. 1.4%.