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the futures price for a contract deliverable in four months is 520. What arbitrage opportunities does this create?...
The 6-month, 12-month, 18-month, and 24-month zero rates are 4%, 4.5%, 4.75%, and 5% with semiannual...
The 6-month, 12-month, 18-month, and 24-month zero rates are 4%, 4.5%, 4.75%, and 5% with semiannual compounding, respectively. (a) What are the rates with continuous compounding? (b) What is the forward rate for the six-month period beginning in 18 months? (c) What is the value of an FRA that promises to pay you 6% (with semiannual payment) on a principal of $1 million for the six-month period starting in 18 months? (d) If the six-month LIBOR rate were 6.5% in...
The 18-month, and 24-month risk-free zero rates are 4.75%, and 5% with semiannual compounding. What is...
The 18-month, and 24-month risk-free zero rates are 4.75%, and 5% with semiannual compounding. What is the value of an FRA where the holder pays LIBOR and receives 7% (semiannually compounded) for a six-month period beginning in 18 months? The principak is $10 million
30. Which of the following is true? A. Both forward and futures contracts are traded on exchanges Porward contracts are traded on exchanges, but futures contracts are not. Futures contracts ar...
30. Which of the following is true? A. Both forward and futures contracts are traded on exchanges Porward contracts are traded on exchanges, but futures contracts are not. Futures contracts are traded on exchanges, but forward contracts are not. D: Neither futures contracts nor forward contracts are traded on exchanges. 2. Long answer questions (25 points) Note: write down the necessary st eps; round the answer to two decimal points, e g . 0.45%. (1) The following table gives the...
5. (a) Explain the differences between a forward contract and an option. [2] (b) An investor...
5. (a) Explain the differences between a forward contract and an option. [2] (b) An investor has taken a short position in a forward contract. If Sy is the price of the underlying stock at maturity and K is the strike, what is the payoff for the investor? Does the investor expect the underlying stock price to increase or decrease? Explain your answer. (2) (c) (i) An investor has just taken a short position in a 6-month forward contract on...
i need simple explain please 7) The zero rates for three, six, nine and twelve compounding....
i need simple explain
please
7) The zero rates for three, six, nine and twelve compounding. These rates suggest that the forwa continuous compounding. What is the present va annum rate with quarterly compounding) for $1,000,000? e, Six, nine and twelve months are 8%, 8.2%, 8.4% and 8.5% with continuous Best that the forward rate between nine months and twelve months is 8.8% with Is the present value of an FRA that enables the holder to earn 9.4% (per very...
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...
4. Forward and Futures Prices A. (6 points) Suppose the stock price is $35 and the...
4. Forward and Futures Prices A. (6 points) Suppose the stock price is $35 and the continuously compounded interest rate is 5%. What is the 6-month forward price, assuming dividends are zero? B. (6 points) If the forward price is $35.50, what is the annualized continuous dividend yield? 5. Forward and Futures Prices Suppose you are a market-maker in S&R index forward contracts. The S&R index spot price is 1100, the risk-free rate is 5%, and the dividend yield on...
Exercise 2. The 6-month, 12-month. I 8-month, and 24-month zero rates are 4%, 4.5%, 4.75% and 5%, with continuous compounding (a) What are the rates with semi-annual compounding? (c) Forward rates ar...
Exercise 2. The 6-month, 12-month. I 8-month, and 24-month zero rates are 4%, 4.5%, 4.75% and 5%, with continuous compounding (a) What are the rates with semi-annual compounding? (c) Forward rates are rates of interest implied by current zero rates for periods of time in the future. Calculate the forward rate for year 2, i.e. the rate for the period of time between the end of 12-month and the end of 24-month. (d) Consider a 2-year bond providing semiannual coupon...
A trader owns 55,000 units of a particular asset and decides to hedge the value of...
A trader owns 55,000 units of a particular asset and decides to hedge the value of her position with futures contracts on another related asset. Each futures contract is on 5,000 units. The spot price of the asset that is owned is $28 and the standard deviation of the change in this price over the life of the hedge is estimated to be $0.43. The futures price of the related asset is $27 and the standard deviation of the change...
Exercise 3. A short forward contract on a dividend-paying stock was entered some time ago. It currently has 9 months to maturity. The stock price and the delivery price is s25 and $24 respectively. T...
Exercise 3. A short forward contract on a dividend-paying stock was entered some time ago. It currently has 9 months to maturity. The stock price and the delivery price is s25 and $24 respectively. The risk-free interest rate with continuous compounding is 8% per annum. The underlying stock is expected to pay a dividend of $2 per share in 2 months and an another dividend of $2 in 6 months. (a) What is the (initial) value of this forward contract?...
30. Which of the following is true? A. Both forward and futures contracts are traded on exchanges Porward contracts are traded on exchanges, but futures contracts are not. Futures contracts are traded on exchanges, but forward contracts are not. D: Neither futures contracts nor forward contracts are traded on exchanges. 2. Long answer questions (25 points) Note: write down the necessary st eps; round the answer to two decimal points, e g . 0.45%. (1) The following table gives the...
5. (a) Explain the differences between a forward contract and an option. [2] (b) An investor has taken a short position in a forward contract. If Sy is the price of the underlying stock at maturity and K is the strike, what is the payoff for the investor? Does the investor expect the underlying stock price to increase or decrease? Explain your answer. (2) (c) (i) An investor has just taken a short position in a 6-month forward contract on...
i need simple explain
please
7) The zero rates for three, six, nine and twelve compounding. These rates suggest that the forwa continuous compounding. What is the present va annum rate with quarterly compounding) for $1,000,000? e, Six, nine and twelve months are 8%, 8.2%, 8.4% and 8.5% with continuous Best that the forward rate between nine months and twelve months is 8.8% with Is the present value of an FRA that enables the holder to earn 9.4% (per very...
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...
4. Forward and Futures Prices A. (6 points) Suppose the stock price is $35 and the continuously compounded interest rate is 5%. What is the 6-month forward price, assuming dividends are zero? B. (6 points) If the forward price is $35.50, what is the annualized continuous dividend yield? 5. Forward and Futures Prices Suppose you are a market-maker in S&R index forward contracts. The S&R index spot price is 1100, the risk-free rate is 5%, and the dividend yield on...
Exercise 2. The 6-month, 12-month. I 8-month, and 24-month zero rates are 4%, 4.5%, 4.75% and 5%, with continuous compounding (a) What are the rates with semi-annual compounding? (c) Forward rates are rates of interest implied by current zero rates for periods of time in the future. Calculate the forward rate for year 2, i.e. the rate for the period of time between the end of 12-month and the end of 24-month. (d) Consider a 2-year bond providing semiannual coupon...
Exercise 3. A short forward contract on a dividend-paying stock was entered some time ago. It currently has 9 months to maturity. The stock price and the delivery price is s25 and $24 respectively. The risk-free interest rate with continuous compounding is 8% per annum. The underlying stock is expected to pay a dividend of $2 per share in 2 months and an another dividend of $2 in 6 months. (a) What is the (initial) value of this forward contract?...
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