Question

QUESTION 13 A futures contract on copper traded at the Chicago Mercantile Exchange has a denomination of 25,000 pounds. Today you enter into a long futures position of 10 contracts on copper at $3.33 per pound, maturing in 6 months. If copper is trading at $3.24 at maturity, what is your net profit from this position? QUESTION 14 You expect that the stock of GoPro, currently trading at $70 per share, will be volatile in the next three months, and the price will change significantly. However, you do not know the direction of the change. Thus, you decide to enter into a long straddle position using 3 month options, buying both a put and a call contract struck at $70. The premium on both options is $2 per share. If at maturity, GoPro is trading at $88 per share, what is your net profit on this position? Remember that each option contract is for 100 shares. QUESTION 15 You own 1000 shares of MMM that you bought for $154. You also have written 10 call option contracts on MMM, at a premium of $1.3 and with a strike price of $162, maturing in 2 months. If at maturity of the option, the stock price is $165, what is your net profit on this position? QUESTION 16 In a perfectly efficient market, an active strategy mutual fund that charges a 1% fee has about a 47% chance of beating the index net of fee. In a universe of 5,000 funds, how many funds would you expect to beat the index all but once out of the past 5 years? In other words, the fund would fail to beat the benchmark in one of the 5 years. Enter answer accurate to two decimal places. QUESTION 17 Two years ago an investor invested $28 thousand into a fund with a 3.7% front-end load, a 1.6% annual expense ratio, and a NAV of $34.88 per share. The securities in the fund increased by 11.3 percent each year, and then the investor sold the fund. What was the investor's total holding period return? Enter answer in percents, accurate to two decimal places.

Answer 1

Question No 13:

Long position are often used in the context of buying an option contract. Loss can occur in this position if market price of future < purchase price of future.

Question No 13: Long future position of 10 Contract = 250,000 pound If you secure a long position at $3.33 per pound but at maturity the market price comes down to $3.24 per pound, then ther is a loss of $ 0.09 per pound. Total loss = 250,000 X.09 Total loss = 250,000 X.09 Total loss = $ 22,500