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3) Suppose you purchased $100 million notional of a bond at a price of 75. Assume...
Suppose the future price is 1200 and you wish to acquire a $10 million position in...
Suppose the future price is 1200 and you wish to acquire a $10 million position in the S&P 500 index. a) Find the notional value of one contract (amount you are agreeing to pay at expiration per futures contract) b) Suppose you go long $10 million of the index: How many futures contracts would you enter? c) Suppose there is 20% margin, If the S&P 500 future drops by 10, how much do you lose on your futures position? d)...
1) A call option is priced at $7 with an exercise price of $100 and an...
1) A call option is priced at $7 with an exercise price of $100 and an underlying stock price of $98. If the stock price at expiry is $102 determine the following: o Option value for a long position o Profit for a long position 2) A put option is priced at $4 with an exercise price of $60 and an underlying price of $62. Determine the following: o Option value for a long position if the stock price at...
Assume you just purchased 100 shares of Apple stocks at $580. You are worrying that the competition...
Assume you just purchased 100 shares of Apple stocks at $580. You are worrying that the competition from other tablet PC producers will have a negative impact on Apple stock prices in 1 month. Generally speaking, you are still quite bullish on Apple stock. (i) In order to hedge against this downside risk, you establish a protective put position by buying a put option contract with around 1-month maturity on Apple stock (note: 1 contract consists of 100 options). Each put option...
2) A put option is priced at $4 with an exercise price of $60 and an...
2) A put option is priced at $4 with an exercise price of $60 and an underlying price of $62. Determine the following: o Option value for a long position if the stock price at expiry is $62 Profit for the long position if the stock price at expiry is $55 • What is the breakeven stock price at expiration (price at which the option cost is covered for the long position) 3) The share price of Win Big Inc....
A bond future currently bond portfolio with a face value $10 million. The current market value...
A bond future currently bond portfolio with a face value $10 million. The current market value of the portfolio is only 92.2% of face, however. The fund managers anticipate a rise in bond yield in the near future so they desire a T-bond hedge strategy to protected themselves. Given their rate expectations, should they short or go long in T-bond futures? Explain The risk manager use $100,000 face value T bond contracts. If they use a 1-1 (naïve) hedge ration...
Consider a forward contract to purchase a coupon-bearing bond whose current price is $900. Suppose the...
Consider a forward contract to purchase a coupon-bearing bond whose current price is $900. Suppose the forward contract matures in 9 months. Assume the coupon payment of $40 is expected after 4 months. Assume that the 4-month and 9-month risk-free continuously compounded interest rate are 3% and 4% per annum, respectively. Suppose the forward price is $910. Is there an arbitrage opportunity? If so, how do you take advantage of the arbitrage opportunity?
Consider the following five bonds, all with notional amounts of $100.00, that are trading in a...
Consider the following five bonds, all with notional amounts of $100.00, that are trading in a liquid market on September 30th 2018 T-bill 1: 1 year maturity, no annual coupon, market price = $99.01 T-bill 1: 3 year maturity, no annual coupon, market price = $92.86 Bond 1: 4 year maturity, 4% annual coupon, market price = $103.92 Bond 2: 5 year maturity, 2% annual coupon, market price = $95.52 Bond 3: 5 year maturity, 8% annual coupon, market price...
Requires a series of clear and formal answer process, THANK U! 3. a) You are a producer of steel and need to purchase raw steel as input for your factory. You expect to spend 100,000 USD in five y...
Requires a series of clear and formal answer process,
THANK U!
3. a) You are a producer of steel and need to purchase raw steel as input for your factory. You expect to spend 100,000 USD in five years' time to purchase the raw steel. However, you also know that steel price is influenced by interest rates movements and that for 19% change in the risk free rate, the price of raw steel will change by 4.5%, what investment strategy...
Suppose four years ago you purchased a 10-year, zero-coupon bond with a face value of $100...
Suppose four years ago you purchased a 10-year, zero-coupon bond with a face value of $100 at a price of A. The bond currently trades at a price of B. Assume the YTM for this bond has been the same in the past four years (that is YTM in four years ago is equal to the YTM today). Compare the price A v.s. B.
covered call writer break even at (4) The current price of an asset is $100, An...
covered call writer break even at (4) The current price of an asset is $100, An out-of-the-money American put option with an exercise price of $90 is purchased along with'the asset. If the breakeven point for this hedge is at an asset price of $114 at expirationjwhatis the value of the American put at the time of purchase? (5) A stock index fiutures what is your per-share gain or loss? ying two calls and one put on ABC stock, all...
1) A call option is priced at $7 with an exercise price of $100 and an underlying stock price of $98. If the stock price at expiry is $102 determine the following: o Option value for a long position o Profit for a long position 2) A put option is priced at $4 with an exercise price of $60 and an underlying price of $62. Determine the following: o Option value for a long position if the stock price at...
2) A put option is priced at $4 with an exercise price of $60 and an underlying price of $62. Determine the following: o Option value for a long position if the stock price at expiry is $62 Profit for the long position if the stock price at expiry is $55 • What is the breakeven stock price at expiration (price at which the option cost is covered for the long position) 3) The share price of Win Big Inc....
Requires a series of clear and formal answer process,
THANK U!
3. a) You are a producer of steel and need to purchase raw steel as input for your factory. You expect to spend 100,000 USD in five years' time to purchase the raw steel. However, you also know that steel price is influenced by interest rates movements and that for 19% change in the risk free rate, the price of raw steel will change by 4.5%, what investment strategy...
covered call writer break even at (4) The current price of an asset is $100, An out-of-the-money American put option with an exercise price of $90 is purchased along with'the asset. If the breakeven point for this hedge is at an asset price of $114 at expirationjwhatis the value of the American put at the time of purchase? (5) A stock index fiutures what is your per-share gain or loss? ying two calls and one put on ABC stock, all...
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