Selling rate of forward contract = $1.16/Euro
Buying rate today = $1.13/Euro
Hence, Profit expected After 9 months = (1.16-1.13)*4,000,000 = $120,000
Hence, value of forward contract = 120,000/(1+0.02*9/12)
= $118,226.60
i.e. $118,227
You sold $4,000,000 forward at $1.16/. There are nine months remaining to maturity. The forward price is now $1.13/S. The US risk-free rate is 2% and the UK risk-free rate is 3%. Both rates are annu...
2. Suppose that zero interest rates with quarterly compounding are as follows: Maturity (months) Rate(%) 3 8.0 6 8.4 9 8.8 12 9.0 i. Calculate the forward interest rates for the second, third, and fourth quarters. ii. You should have found that the forward rate over the fourth quarter is 9.6006%. Carefully explain the available arbitrage strategy and calculate your profit) if you found a bank willing to lend to you forward at 9.0000% over the fourth quarter.
BF2207 Question 2 Suppose that, six months ago, you sold a call option on 1,000,000 euros (EUR) with an expiration date of six months and an exercise price of 1.1780 United States dollars (USD). You received a premium on the call option of 0.045 USD per unit. Assume the following: • Money market interest rates for EUR are constant through time and equal 5% for all maturities. • Money market interest rates for USD are constant through time and equal...
yield to maturity ofAS1000bond with aG96 obupon rate, semiannualaupoits andfwoven to maturity is 7.6% APR, compo price be? unded semia 48 06 the spot rates for six months, ears are 1%, 1.1%, and 13%, all quoted as semiannually in 1% 11. Assume the current Treasu e pounded APRs. What is the price of a$1000 par 4% coupon bon maturing in eer he one year, and ly years (the next coupon is exactly six months from sowi trading for $1034.74. l...
HOME ASSIGNMENT
PROBLEM №1
What is a forward price of an index JKL given the following
information?
Date of pricing: November 15, 2019
Time till expiration: four months / Contract expires on March
15, 2020
Current value of an index: 2 803
Continuously compounded interest rate: 4.5 %
Continuously compounded dividend yield: 2.3%
PROBLEM №2
What is the value of the forward contract (specified in
problem №1) on January 15, 2020 if:
Forward price of contract with the same underlying...
Problem1 A stock is currently trading at S $40, during next 6 months stock price will increase to $44 or decrease to $32-6-month risk-free rate is rf-2%. a. [4pts) What positions in stock and T-bills will you put to replicate the pay off of a European call option with K = $38 and maturing in 6 months. b. 1pt What is the value of this European call option? Problem 2 Suppose that stock price will increase 5% and decrease 5%...
True/False (1 Point each) 1) When bond prices decrease, their yields to maturity increase. 2) The best forms of money and financial systems enjoy the benefits of trust, belief, and stability. 3) A fundamental function of a commercial bank is to take in deposits and make loans. 4) Traditional banks operate with low margins and high leverage. 5) Rates on bonds issued by a government can be negative. 6) ) The default risk premium is the same as the credit...
Please read the article and answer about questions. You and the Law Business and law are inseparable. For B-Money, the two predictably merged when he was negotiat- ing a deal for his tracks. At other times, the merger is unpredictable, like when your business faces an unexpected auto accident, product recall, or government regulation change. In either type of situation, when business owners know the law, they can better protect themselves and sometimes even avoid the problems completely. This chapter...