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Question 4 (10 marks) Suppose the spot price of gold is $1,500 per troy ounce today....
] Question 4 (10 marks) Suppose the spot price of gold is $1,500 per troy ounce...
]
Question 4 (10 marks) Suppose the spot price of gold is $1,500 per troy ounce today. The futures price of gold for delivery in 1 year is $1,530 per troy ounce. Assume that the one-year gold futures contract is correctly priced and there are no storage and insurance costs. Also assume that the risk-free rate is compounded annually and you can borrow and lend money at the risk-free rate. a). What is the theoretical parity price of a two-year...
The current spot price of gold is $1200 per ounce. The riskless interest rate is 1%...
The current spot price of gold is $1200 per ounce. The riskless interest rate is 1% per month. For simplicity, assume there are no storage/security costs of gold. a) If you need to buy the gold in 8 months’ time, which position (long or short) will you take in the futures market to hedge the price risk of the gold? b) What is the arbitrage-free futures price for the delivery of gold in 8 months’ time? c) If you see...
a. If the spot price of gold is $980 per troy ounce, the risk-free interest rate...
a. If the spot price of gold is $980 per troy ounce, the risk-free interest rate is 6%, and storage and insurance costs are zero, what should be the forward price of gold for delivery in one year? (Round your answer to 2 decimal places.) Forward price b. Calculate risk-free arbitrage profits if the forward price is $1,080. (Round your final answers to nearest whole dollar amount.) Profit L
The spot price of gold is $25 per ounce. The storage costs are $0.36 per ounce...
The spot price of gold is $25 per ounce. The storage costs are $0.36 per ounce per year payable monthly in advance. Assuming that interest rates are 6% per annum for all maturities, calculate the futures price of gold for delivery in 3 months. (The interest rate is continuously compounded.)
10. (Lecture Note 2) The current spot price of trader, can borrow money at 6% per...
10. (Lecture Note 2) The current spot price of trader, can borrow money at 6% per year wit 3% per year with continuous compounding. The cu ne current spot price of silver is $16.75 per troy ounce. Sam Chatwick, a metals w money at 6% per year with continuous compounding and lend money (risk-free) at with continuous compounding. The current six-month forward price of silver is $17.13. Does Jarl have any arbitrage opportunities? If one does exist. use an arbitrare...
The December 2020 Gold Futures contract was priced at $1,500.00 (i.e., F0) per troy ounce on...
The December 2020 Gold Futures contract was priced at $1,500.00 (i.e., F0) per troy ounce on 3/16/2020. Each gold futures contract represents 100 troy ounces. The initial margin requirement (IMR) is $8,000 per contract and the maintenance margin requirement (MMR) is $6,000 per contract. Jennifer Shaw bought 1 December 2020 Gold futures contract at $1,500.00 on 3/16/2020; Pauline Woo sold 1 December 2020 Gold futures contract at $1,500.00 on 3/16/2020. Today (3/17/2020), the December 2020 Gold futures contract is priced...
Intro The futures price per troy ounce of gold delivered in 3 months is as follows:...
Intro The futures price per troy ounce of gold delivered in 3 months is as follows: Day Futures price 1,239 1 1,243 1,235 2 1,231 Each contract is for 100 troy ounces. Attempt 2/10 for 10 pts Part 4 If the initial margin requirement is 30%, how much money do you have to put into your brokerage account? No decimals Submit Attempt 4/10 for 10 pts. Part 5 What is the balance in your margin account at the end of...
Suppose that the spot price of gold is $600. The total cost of insurance and storage...
Suppose that the spot price of gold is $600. The total cost of insurance and storage for gold is $30 per year, payable in advance. The rate of interest for borrowing or lending is 20% per year. If the forward price is $800, and you are interested in arbitrage, you would: (Hint: Check answer with an arbitrage table) Sell the spot commodity, lend money, and buy a forward contract Borrow money, buy the spot commodity, and buy a forward contract...
1. Consider the futures contract to buy/sell December gold for $500 per ounce on the New...
1. Consider the futures contract to buy/sell December gold for $500 per ounce on the New York Commodity Exchange (CMX). The contract size is 100 ounces. The initial margin is S3,000, and the maintenance margin is $1,500. 1.a. Suppose that you enter into a long futures contract to buy December for $500 per ounce on the CMX What change in the futures price will lead to a margin call? If you enter a short futures contract, what futures price will...
A) The spot price of the British pound is currently $2.00. If the risk-free interest rate...
A) The spot price of the British pound is currently $2.00. If the risk-free interest rate on 1-year Government bonds is 4% in the United States and 6% in the United Kingdom, what must be the forward price of the pound for delivery 1 year from now? B) Assume that the spot price of gold is $1,500 per troy ounce, the risk-free interest rate is 2%, and storage and insurance costs are zero. 1) What should be the forward price...
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Question 4 (10 marks) Suppose the spot price of gold is $1,500 per troy ounce today. The futures price of gold for delivery in 1 year is $1,530 per troy ounce. Assume that the one-year gold futures contract is correctly priced and there are no storage and insurance costs. Also assume that the risk-free rate is compounded annually and you can borrow and lend money at the risk-free rate. a). What is the theoretical parity price of a two-year...
a. If the spot price of gold is $980 per troy ounce, the risk-free interest rate is 6%, and storage and insurance costs are zero, what should be the forward price of gold for delivery in one year? (Round your answer to 2 decimal places.) Forward price b. Calculate risk-free arbitrage profits if the forward price is $1,080. (Round your final answers to nearest whole dollar amount.) Profit L
10. (Lecture Note 2) The current spot price of trader, can borrow money at 6% per year wit 3% per year with continuous compounding. The cu ne current spot price of silver is $16.75 per troy ounce. Sam Chatwick, a metals w money at 6% per year with continuous compounding and lend money (risk-free) at with continuous compounding. The current six-month forward price of silver is $17.13. Does Jarl have any arbitrage opportunities? If one does exist. use an arbitrare...
Intro The futures price per troy ounce of gold delivered in 3 months is as follows: Day Futures price 1,239 1 1,243 1,235 2 1,231 Each contract is for 100 troy ounces. Attempt 2/10 for 10 pts Part 4 If the initial margin requirement is 30%, how much money do you have to put into your brokerage account? No decimals Submit Attempt 4/10 for 10 pts. Part 5 What is the balance in your margin account at the end of...
1. Consider the futures contract to buy/sell December gold for $500 per ounce on the New York Commodity Exchange (CMX). The contract size is 100 ounces. The initial margin is S3,000, and the maintenance margin is $1,500. 1.a. Suppose that you enter into a long futures contract to buy December for $500 per ounce on the CMX What change in the futures price will lead to a margin call? If you enter a short futures contract, what futures price will...
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