Bloomberg Scipio Quiz 1 You opened the option page of Ford company in Bloomberg,
ID: 2810169 • Letter: B
Question
Bloomberg Scipio Quiz
1 You opened the option page of Ford company in Bloomberg, and noticed the following quotes
One option contract allows you to trade on 100 underlying shares. If you want to buy one option contract today, you should pay
a. $0.16
b. $0.17
c. $17
d. $16
2 On the FX market of Bloomberg, you observed that the FX rate between Euro and US dollar is quoted as EUR/USD = 1.1621. The 3-month forward rate is quoted as 32.18. This implied three months later on, each Euro will
a. appreciate to 1.1653 US dollar
b. depreciate to 1.4839 US dollar
c. appreciate to 1.4839 US dollar
d. depreciate to 1.1653 US dollar
Explanation / Answer
1. Ans is (c)
Given the Ask or buy price of the options contract is $0.17 per contract.
-> Since the option contract represents 100 underlying shares, the total price to be paid for one contract = price per contract * no. of underlying shares in the contract
= $0.17*100
=$17
2. Ans is (a)
Given Spot rate today for EUR = USD 1.1621
Here the 3-month forward rate is indicated in Forward Points. 'X' forward points imply an addition of X/10,000 to the spot rate. (X can be positive or negative based on if the future rate is increasing or decreasing)
Given forward points = 32.18
-> Implied rate 3-months from now = Spot rate + (Forward points/10,000)
= 1.1621+(32.18/10,000)
=1.1653
Thus the value of Euro appreciated from USD 1.1621 to USD1.1653
A positive forward rate indicates appreciation while a negative one indicates depreciation in the currency rates.
Thus EURO appreciated to 1.1653 US dollar.