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The document presents multiple-choice problems covering collars and put-call parity, option-based hedging ranges, interest-rate and forward pricing using zero-coupon bond inputs, commodity swaps for locking forward prices, and option-payoff strategies such as straddles, strangles, and butterfly spreads. Each question is followed by answer choices intended to support exam preparation and self-study.",{"@graph":69,"@context":123},[70,84,106],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":20,"@type":76,"position":81},"https://docshare.wps.com/document/exam/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/exam-fm-financial-mathematics-sample-questions-and-solutions-for-derivatives-markets-sample-questions-for-exam-fm2/399308/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/exam-fm-financial-mathematics-sample-questions-and-solutions-for-derivatives-markets-sample-questions-for-exam-fm2/399308.png","ImageObject",300,407,{"name":92,"@type":93},"Genevieve","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-27","2026-09-27",true,{"@type":102,"interactionType":103,"userInteractionCount":105},"InteractionCounter",{"@type":104},"ViewAction",15,{"@type":107,"mainEntity":108},"FAQPage",[109,115,119],{"name":110,"@type":111,"acceptedAnswer":112},"What is the scope of these FM/2 practice questions?","Question",{"text":113,"@type":114},"They are written to help students study for the Course FM/2 exam and focus on topics within Financial Mathematics, rather than covering the entire syllabus breadth for Financial Economics.","Answer",{"name":116,"@type":111,"acceptedAnswer":117},"How do the questions use put-call parity?",{"text":118,"@type":114},"Several problems ask for quantities such as the strike price that satisfy put-call parity, or how put and call transactions achieve a target option-based payoff and cost today.",{"name":120,"@type":111,"acceptedAnswer":121},"What kinds of derivative payoff structures are tested?",{"text":122,"@type":114},"The document includes problems involving collars, straddles/strangles, and butterfly spreads, typically asking which action produces a specified profit or matches a true/false statement about expected prices or contract type.","https://schema.org",{"og:url":83,"og:type":125,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":127,"canonical":83},"index,follow",{"doc_id":129,"site_id":62},399308,1790503332,{"code":4,"msg":5,"data":132},{"doc_id":129,"user_id":133,"nickname":92,"user_avatar":134,"doc_module":4,"category_id":19,"category_name":20,"doc_title":65,"doc_description":67,"doc_content":135,"file_id":136,"file_url":137,"file_type":138,"file_size":139,"view_count":105,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":39,"language":140,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":141,"faqs":142,"seo_title":143,"seo_description":67,"update_tm":144,"read_time":46,"preview_page_count":4},1374391974585,"https://ap-avatar.wpscdn.com/davatar_276721f389ce27ea32af1340a28f341c","SOCIETY OF ACTUARIES/CASUALTY ACTUARIAL SOCIETY  \nEXAM FM FINANCIAL MATHEMATICS  \nSAMPLE QUESTIONS AND SOLUTIONS FOR DERIVATIVES MARKETS  \nCopyright 2007 by the Society of Actuaries and the Casualty Actuarial Society  \nFM-09-07 PRINTED IN U.S.A.  \nSAMPLE QUESTIONS FOR EXAM FM/2  \nThese questions have been written to assist the student in studying for the Course FM/2 exam. They are not intended to cover the entire breadth of the syllabus for Financial Economics.  \n1. Which statement about zero-cost purchased collars is FALSE?  \nA. A zero-width, zero-cost collar can be created by setting both the put and call strike prices at the forward price.  \nB. There are an infinite number of zero-cost collars.  \nC. The put option can be at-the-money.  \nD. The call option can be at-the-money.  \nE. The strike price on the put option must be at or below the forward price.  \n2. You are given the following information:  \n• The current price to buy one share of XYZ stock is 500.  \n• The stock does not pay dividends.  \n• The risk-free interest rate, compounded continuously, is 6% .  \n• A European call option on one share of XYZ stock with a strike price ofK that expires in one year costs 66.59.  \n• A European put option on one share of XYZ stock with a strike price ofK that expires in one year costs 18.64.  \nUsing put-call parity, determine the strike price, K.  \nA. 449  \nB. 452  \nC. 480  \nD. 559  \nE. 582  \n3. Happy Jalapenos, LLC has an exclusive contract to supply jalapeno peppers to the organizers of the annual jalapeno eating contest. The contract states that the contest organizers will take delivery of 10,000 jalapenos in one year at the market price. It will cost Happy Jalapenos 1,000 to provide 10,000 jalapenos and today’s market price is 0.12 for one jalapeno. The continuously compounded risk-free interest rate is 6% .  \nHappy Jalapenos has decided to hedge as follows (both options are one-year, European):  \nBuy 10,000 0.12-strike put options for 84.30 and sell 10,000 0.14-stike call options for 74.80.  \nHappy Jalapenos believes the market price in one year will be somewhere between 0.10 and 0.15 per pepper. Which interval represents the range of possible profit one year from now for Happy Jalapenos?  \nA.–200 to 100  \nB.–110 to 190  \nC.–100 to 200  \nD. 190 to 390  \nE. 200 to 400  \n4. Zero-coupon risk-free bonds are available with the following maturities and yield rates (effective, annual):  \n\n| Maturity (years) | Yield |\n| --- | --- |\n| 1 | 0.06 |\n| 2 | 0.065 |\n| 3 | 0.07 |\n\nYou need to buy corn for producing ethanol. You want to purchase 10,000 bushels one year from now, 15,000 bushels two years from now, and 20,000 bushels three years from now. The current forward prices, per bushel, are 3.89, 4.11, and 4.16 for one, two, and three years respectively.  \nYou want to enter into a commodity swap to lock in these prices. Which of the following sequences of payments at times one, two, and three will NOT be acceptable to you and to the corn supplier?  \nA. 38,900, 61,650, 83,200  \nB. 39,083, 61,650, 82,039  \nC. 40,777, 61,166, 81,554  \nD. 41,892, 62,340, 78,997  \nE. 60,184, 60,184, 60,184  \n5. You are given the following information:  \n• One share of the PS index currently sells for 1,000 .  \n• The PS index does not pay dividends.  \n• The effective annual risk-free interest rate is 5% .  \nYou want to lock in the ability to buy this index in one year for a price of 1,025 . You can do this by buying or selling European put and call options with a strike price of  \n1,025 . Which of the following will achieve your objective and also gives the cost today of establishing this position.  \nA. Buy the put and sell the call, receive 23.81  \nB. Buy the put and sell the call, spend 23.81  \nC. Buy the put and sell the call, no cost  \nD. Buy the call and sell the put, receive 23.81  \nE. Buy the call and sell the put, spend 23.81  \n6. The current price of one share of XYZ stock is 100. The forward price for delivery of one share of XYZ stock in one year is ","cbCaifUEB57Ms4f8","https://ap.wps.com/l/cbCaifUEB57Ms4f8","pdf",74892,"English","# Sample Questions for Exam FM/2\n## Collar and Put-Call Parity\n## Hedging with Puts and Calls\n## Zero-Coupon Bonds and Forward Pricing\n## Commodity Swap Cash Flows\n## Option Pricing with Put-Call Parity\n## Forward vs Expected Stock Price\n## Prepaid Forwards and Contract Types\n## Speculation with Volatility Mispricing\n## Butterfly Spreads and Replication","[{\"question\":\"What is the scope of these FM/2 practice questions?\",\"answer\":\"They are written to help students study for the Course FM/2 exam and focus on topics within Financial Mathematics, rather than covering the entire syllabus breadth for Financial Economics.\"},{\"question\":\"How do the questions use put-call parity?\",\"answer\":\"Several problems ask for quantities such as the strike price that satisfy put-call parity, or how put and call transactions achieve a target option-based payoff and cost today.\"},{\"question\":\"What kinds of derivative payoff structures are tested?\",\"answer\":\"The document includes problems involving collars, straddles/strangles, and butterfly spreads, typically asking which action produces a specified profit or matches a true/false statement about expected prices or contract type.\"}]","EXAM FM FINANCIAL MATHEMATICS - SAMPLE QUESTIONS AND SOLUTIONS FOR DERIVATIVES MARKETS - SAMPLE QUESTIONS FOR EXAM FM/2 | PDF",1790496043]