Which of the following can explain a contango? a. futures prices exceed forward prices b. the...
Which of the following can explain a contango?
|
a. |
futures prices exceed forward prices |
|
|
b. |
the cost of carry is negative |
|
|
c. |
when spot prices and futures prices dance around each other over time |
|
|
d. |
excess current supply causes the spot price to be less than the futures price |
|
|
e. |
none of the above |
Homework Answers
Contango Situation Describes When Future Prices Higher than the Spot Price.
Option a: futures prices exceed forward prices:(False) Difference between futures & forward price occurs due to facility of exchange trading in futures. But it does not affect spot price.
Option b: the cost of carry is negative:(False) If the cost of carry is negative future price will be less than the spot price.
Option c: when spot prices and futures prices dance around each other over time:(False) It does not confirm that future price will be always higher than the spot price.
Option a: excess current supply causes the spot price to be less than the futures price :(True) If current supply is excess spot price will be always lesser than future price.
Contango Situation
Add Answer to:
Which of the following can explain a contango?
a.
futures prices exceed forward prices
b.
the...
6. Forward and Futures Prices (16 points) Suppose the S&R index is 800, and that the...
6. Forward and Futures Prices (16 points) Suppose the S&R index is 800, and that the dividend yield is 0. You are an arbitrageur with a continuously compounded borrowing rate of 5.5% and a continuously compounded lending rate of 5%. Supposing that there are no transaction fees, show that a cash-and-carry arbitrage is not profitable if the 1-year forward price is less than 845.23, and that a reverse cash-and-carry arbitrage is not profitable if the 1-year forward price is greater...
13. Assume there are only three possible outcomes for the sp commodity which underlies a futures...
13. Assume there are only three possible outcomes for the sp commodity which underlies a futures contract a contract. As seen today, these prices (i.e. those at the maturi contract) are 90, 100 or 110 and each may occur with probabin ossible outcomes for the spot price of a underlies a futures contract at the maturity of that futures se prices (i.e. those at the maturity of the futures ach may occur with probability 1/3, 1/3 and 1/3. sume that...
Which of the following duties is not performed by the clearinghouse A) holding margin deposits b)...
Which of the following duties is not performed by the clearinghouse A) holding margin deposits b) guaranteeing performance of buyer and writer c) maintaining records of transaction d) none of the above What are circuit breakers? a) rules that stop trading when futures are about the expires b)a system that shut down the exchange computer during periods of abnormal price changes c) rules that limit the number of contracts a speculator can hold D) none of the above Despite the...
sume there are only three possible outcomes for the spot price of a commodity which underlies...
sume there are only three possible outcomes for the spot price of a commodity which underlies a futures contract at the maturity of that futures contract. As seen today, these prices (i.e. those at the maturity of the futures contract) are 90, 100 or 110 and each may occur with probability 1/3, 1/3 and 1/3. Further, assume that futures market prices are set in accordance with the theory of (normal) contango. Which of the following is a potential price that...
1. Which of the following trades implies that ownership has been taken? a. Buying a futures...
1. Which of the following trades implies that ownership has been taken? a. Buying a futures contract. b. Selling a futures contract. c. Buying a stock. d. Shorting a stock. e. None of the above implies ownership. The following transactions are the only ones made during the first 4 days a futures contract trades. Answer question 2 based on this table. DAY TRANSACTION S O 1 A Long 30, B Short 30 2 A Long 55, C Short 55 3...
Can anyone answer the question and explain it thx alot The following statement is to be...
Can anyone answer the question and explain it thx alot
The following statement is to be used in answering questions 29 and 30. Company X, a low-rated firm, desires a fixed-rate, long-term loan. X presently has access to floating interest rate funds at a margin of 1.25% over LIBOR. Its direct borrowing cost is 11% in the fixed-rate bond market. In contrast, company Y, which prefers a floating-rate loan, has access to fixed-rate funds in the Eurodollar bond market at...
9. Hedging strategy to protect against falling prices Price fluctuations in commodities can have significant consequences...
9. Hedging strategy to protect against falling prices Price fluctuations in commodities can have significant consequences for companies, especially if the fluctuation involves a prime raw material for a company. Different companies will adopt different strategies to manage the risk in price fluctuations, indluding adjusting the timing of their commodity purchases, maintaining a safety stock of their raw materials, and hedging Consider the case of Cranked Coffee Company, a large copper-producing company The company's cost of producing copper is about...
Which of the following statements about bonds and their prices is correct: There is an inverse...
Which of the following statements about bonds and their prices is correct: There is an inverse relationship between interest rates and price. When the coupon rate of the bond is greater than the required, market interest rate, the price of the bond is greater than the face value of the bond. The bond with a greater term to maturity is affected to a greater extent by the change in the interest rate All of the above A) and B) only...
Oil prices rose more than 20% this year but there were no sharp spikes and crude...
Oil prices rose more than 20% this year but there were no sharp spikes and crude futures barely sniffed $70 a barrel despite attacks on the world’s biggest oil producer, sanctions that crippled crude exports of two OPEC members and gigantic supply cuts from big oil producing countries. The price gains in crude oil benchmarks were all in the first quarter of 2019, even as the next several months featured supply shocks that in the past would probably have propelled...
1. Which of the following is not a property of the aggregate demand curve? It shows...
1. Which of the following is not a property of the aggregate demand curve? It shows the relationship between the overall price level and level consumption. It shows the price level on the vertical axis and output on the horizontal axis. The aggregate demand curve slopes downward. It shows the relationship between the overall price level and the level of total demand. 2. When the price level increases people: feel more wealthy. have the same real value of assets, regardless...
6. Forward and Futures Prices (16 points) Suppose the S&R index is 800, and that the dividend yield is 0. You are an arbitrageur with a continuously compounded borrowing rate of 5.5% and a continuously compounded lending rate of 5%. Supposing that there are no transaction fees, show that a cash-and-carry arbitrage is not profitable if the 1-year forward price is less than 845.23, and that a reverse cash-and-carry arbitrage is not profitable if the 1-year forward price is greater...
13. Assume there are only three possible outcomes for the sp commodity which underlies a futures contract a contract. As seen today, these prices (i.e. those at the maturi contract) are 90, 100 or 110 and each may occur with probabin ossible outcomes for the spot price of a underlies a futures contract at the maturity of that futures se prices (i.e. those at the maturity of the futures ach may occur with probability 1/3, 1/3 and 1/3. sume that...
sume there are only three possible outcomes for the spot price of a commodity which underlies a futures contract at the maturity of that futures contract. As seen today, these prices (i.e. those at the maturity of the futures contract) are 90, 100 or 110 and each may occur with probability 1/3, 1/3 and 1/3. Further, assume that futures market prices are set in accordance with the theory of (normal) contango. Which of the following is a potential price that...
1. Which of the following trades implies that ownership has been taken? a. Buying a futures contract. b. Selling a futures contract. c. Buying a stock. d. Shorting a stock. e. None of the above implies ownership. The following transactions are the only ones made during the first 4 days a futures contract trades. Answer question 2 based on this table. DAY TRANSACTION S O 1 A Long 30, B Short 30 2 A Long 55, C Short 55 3...
Can anyone answer the question and explain it thx alot
The following statement is to be used in answering questions 29 and 30. Company X, a low-rated firm, desires a fixed-rate, long-term loan. X presently has access to floating interest rate funds at a margin of 1.25% over LIBOR. Its direct borrowing cost is 11% in the fixed-rate bond market. In contrast, company Y, which prefers a floating-rate loan, has access to fixed-rate funds in the Eurodollar bond market at...
9. Hedging strategy to protect against falling prices Price fluctuations in commodities can have significant consequences for companies, especially if the fluctuation involves a prime raw material for a company. Different companies will adopt different strategies to manage the risk in price fluctuations, indluding adjusting the timing of their commodity purchases, maintaining a safety stock of their raw materials, and hedging Consider the case of Cranked Coffee Company, a large copper-producing company The company's cost of producing copper is about...
Most questions answered within 3 hours.
-
A square current loop 5.4 cm on each side carries a 510 mA
current. The loop...
asked 1 hour ago -
What are five tips in conducting knowledge assessment/literature
review research? Each of these tips needs to...
asked 2 hours ago -
Antigen presenting cells link innate and adaptive immune
responses. In the theoretical scenario where phagosomes cannot...
asked 2 hours ago -
Dealing with conflict, in my opinion, is a skill and an art. I
believe that those...
asked 3 hours ago -
6. A long straight wire with circular cross section and radius
1.5 cm carries a 1.2...
asked 3 hours ago -
Deacon Corporation has provided the following financial data
from its balance sheet and income statement:
Year...
asked 4 hours ago -
List and discuss at least three variables from everyday life for
which you expect the variable ...
asked 4 hours ago -
A high-pass filter consists of a 1.60 μF capacitor in series
with a 125 Ω resistor....
asked 4 hours ago -
A newly developed artificial intelligence has trouble
distinguishing hand-written numbers from hand-written alphabets.
There are pictures...
asked 4 hours ago -
The carbonate ion CO3 2- has multiple resonance structures.
a. Draw them and assign the hybridization...
asked 4 hours ago -
In doing an allocation for a basket purchase
Use the individual costs and the total market...
asked 4 hours ago -
what were the social political and economic causes and impacts of
the late 19th century urban...
asked 4 hours ago