CSC1 Exam Dumps : Canadian Securities Course Exam 1

To calculate the break-even price for the put options:

The strike price of the put is $55.

The cost per put option is $2.

For the investor to break even, the stock must fall below the strike price by at least the cost of the option.

Break-even price = Strike price - Cost of the option= $55 - $2 =$53

If ABT Ltd. trades at $53, the investor can sell the stock at $55 using the put and recover the $2 premium paid.

References:

Volume 1, Chapter 10:Derivatives, section on "Options Basics" explains the calculation of break-even prices for options​.

To calculate the first coupon payment for Brice's real return bond, we follow these steps:

Step 1: Determine the adjusted principal.

The bond is a real return bond, meaning its principal is adjusted for inflation based on the Consumer Price Index (CPI). The initial principal is$10,000, and CPI increases by0.8%over six months.

Step 2: Calculate the semi-annual coupon payment.

The coupon rate is5% annual, paid semi-annually, so each coupon payment is based on half the annual rate:

A white paper with black text Description automatically generated

Conclusion:

The first coupon payment Brice will receive is$252.

References:

Canadian Securities Course (CSC), Volume 1, Chapter 6: Fixed-Income Securities – Features and Types. Discussion on real return bonds and their adjustment mechanism for inflation​.

Canadian Securities Course (CSC), Volume 1, Chapter 7: Fixed-Income Securities – Pricing and Trading. Calculation methodologies for bond payments​.

Aninterest rate forward agreement (FRA)is anover-the-counter (OTC)derivative contract. Unlike exchange-traded derivatives, OTC contracts are not centrally cleared, meaning there is no intermediary to guarantee performance. This increases counterparty (default) risk, making FRAs inherently riskier than exchange-traded contracts.

A. Individual investor buying shares on an exchange during the ex-rights period: This is a standard transaction involving equity securities, not derivatives, and carries no default risk.

C. Exchange-traded equity option contract between an individual investor and a dealer: Exchange-traded derivatives are backed by a clearinghouse, which mitigates default risk.

D. Individual investor entering a futures contract with an institutional investor: Futures contracts are also exchange-traded and centrally cleared, reducing default risk.