Explanation
The bond equivalent yield for a treasury bill can be calculated as [(Future value - Present value)/Present value x 365/days to maturity]. In this case this works out to ($100-$98)/$98 * 365/90 = 8.28%
[Why do we use 365 days and not 360? And is there a different way to calculate treasury bill yields?
The answer to this question is that there are alternate ways to calculate these yields. For the exam, I would suggest that you calculate according to one method, see if you get an answer that matches, and pick that. I found the below on the NY Fed's website - a very clear example: (http://newyorkfed.org/aboutthefed/fedpoint/fed28.html) The Discount Yield Method The following formula is used to determine the discount yield for T-bills that have three- or six-month maturities:
Discount yield = [(FV - PP)/FV] * [360/M]
FV = face value
PP = purchase price
M = maturity of bill. For a three-month T-bill (13 weeks) use 91, and for a six-month T-bill (26 weeks) use
182
360 = the number of days used by banks to determine short-term interest rates (the investment yield method is based on a calendar year: 365 days, or 366 in leap years).
Example
What is the discount yield for a 182-day T-bill, auctioned at an average price of $9,659.30 per $10,000 face value?
Discount yield = [(FV - PP)/FV] * [360/M]
FV = $10,000 PP = $9,659.30 M = 182
Discount yield = [(10,000) - (9,659.30)] / (10,000) * [360/182]
Discount yield = [340.7 / 10,000] * [1.978022]
Discount yield = .0673912 = 6.74%
For the 13-week bill, the same formula would be used, dividing 360 by a maturity of 91 days rather than 182 days.
The Investment Yield Method
When comparing the return on investment in T-bills to other short-term investment options, the investment yield method can be used. This yield is alternatively called the bond equivalent yield, the coupon equivalent rate, the effective yield and the interest yield.
The following formula is used to calculate the investment yield for T-bills that have three- or six-month maturities:
Investment yield = [(FV - PP)/PP] * [365 or 366/M]
Example
What is the investment yield of a 182-day T-bill, auctioned at an average price of $9,659.30 per $10,000 face value?
Investment yield = [(FV - PP)/PP] * [365/M]
FV = $10,000 PP = $9,659.30 M = 182
Investment yield = [(10,000 - 9,659.30) / (9,659.30)] * [365/182]
Investment yield = [340.70] / 9,659.30] * [2.0054945]
Investment yield = .0707372 = 7.07%
For the 13-week bill, the same formula can be used, dividing 365 (or 366) by a maturity of 91 days.

Explanation
The no-arbitrage futures price is given by exp(0.5*(4%-1%))*$1000 = $1015.11. Therefore Choice 'a' is the correct answer.

Explanation
A swaption is an option to enter into a fixed for floating interest rate swap at a point in the future, with the fixed rate decided upfront. These options can be European, Bermudan or American, in terms of what dates the option can be exercised. A receiver option on a swap is an option that gives the buyer the right to enter into a swap and receive the fixed rate and pay the variable rate. In the case of a payer option, the buyer pays the fixed rate and receives the variable rate. One way to remember this is that receiving and paying are terms used with reference to the fixed rates.

Explanation
Forward rates can be calculated from spot rates and interest rates using the formula Spot x (1+domestic interest rate)/(1+foreign interest rate), where the 'Spot' is expressed as a direct rate (ie as the number of domestic currency units one unit of the foreign currency can buy). In this case the forward rate will be 1.1239
* (1 + 0.75%*90/360) / (1 + 0.4%*90/360) = 1.1249.
It can be confusing to determine which interest rate should be considered 'domestic', and which 'foreign' for this formula. For that, look at the spot rate. Think of the spot rate as being x units of one currency equal to 1 unit of the other currency. In this case, think of the spot rate 1.1239 as "CAD 1.1239 = USD 1". The currency that has the "1" in it is the 'foreign' and the other one is 'domestic'.
It is also important to remember how exchange rates are generally quoted. Most exchange rates are quoted in terms of how many foreign currencies does USD 1 buy. Therefore, a rate of 99 for the JPY means that USD 1 is equal to JPY 99. These are called 'direct rates'. However, there are four major world currencies where the rate quote convention is the other way round - these are EUR, GBP, AUD and NZD. For these currencies, the FX quote implies how many US dollars can one unit of these currencies buy. So a quote of "1.1023" for the Euro means EUR 1 is equal to USD 1.1023 and not the other way round.

Explanation
Price quotes for futures where one of the currencies is the US dollar follow the convention of using the number of US dollars that one unit of the foreign currency can buy. (For JPY, 100 Yen is used.) In the forward market, the convention used is the same as that used in the spot market.
In the spot market, prices are expressed as the number of units of the foreign currency that 1 USD can buy, except for GBP, EUR, AUD and NZD where it is the other way round (ie, number of USDs that 1 of each of these currencies can buy).