Please do this question ASAP and correct 1/ "Fairuz" Case:For risk management purposes, "Fairuz" decided to undertake a strategy consisting ofbuying a put with a strike price of 21.10$ for 1.15$, buying a put with a strike price of16.24$ for 0.16$, and selling two puts with a strike price of 19.9$ for 0.65$ each. Sheentered this position for 1500 contracts that would expire in 3 months from now.a/ What is the amount of her initial investment?b/ What is the amount of her max gain?c/ What is her gain/loss if the stock price in 3 months is 17$ ?d/ What is her (gain/loss) if the stock price in 3 months is lower than the medium strikeprice by 70 basis points?g/ What are the breakeven price(s)?(using the highest and lowest strike prices)2/ "BANCO" Case:A US firm "BANCO" is specialized in providing loans to international firms. In 32 days fromnow "BANCO" is going to lend $11.75 millions to firm "AAA" for 45 days to help it extend itsinternational trade operations. The lending/borrowing rate in US is LIBOR plus 85 basispoints. The risk managers of "BANCO" decided to use options to hedge their positionespecially that the LIBOR rate in US was very volatile during the last few months. Thereforethey decided to use an option with 45 days in underlying and a strike interest rate of 2.25%.We suppose that "BANCO" does not have money to buy the option right now. The currentLIBOR in US is 2.55% and the option costs the bank $5600 with a notional principal of $11.5millions.a/ Compute the Effective annual rate on the loan made by "BANCO" if the LIBOR in 32 daysfrom now is 2% ?b/ Compute the Effective annual rate on the loan made by "BANCO" if the LIBOR in 32 daysfrom now is 2.85% ?

A long butterfly spread is an options strategy that involves buying and selling options contracts to…

1/ "Fairuz" Case: For risk management purposes, "Fairuz" decided to undertake a strategy consisting of buying a put with a strike price of 21.10$ for 1.15$, buying a put with a strike price of 16.24$ for 0.16$, and selling two puts with a strike price of 19.9$ for 0.65$ each. She entered this position for 1500 contracts that would expire in 3 months from now. a/ What is the amount of her initial investment? b/ What is the amount of her max gain?

1/ "Fairuz" Case: For risk management purposes, "Fairuz" decided to undertake a strategy consisting of buying a put with a strike price of 21.10$ for 1.15$, buying a put with a strike price of 16.24$ for 0.16$, and selling two puts with a strike price of 19.9$ for 0.65$ each. She entered this position for 1500 contracts that would expire in 3 months from now. a/ What is the amount of her initial investment? b/ What is the amount of her max gain?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Consider a hypothetical futures contract where the current price is $ 212. The initial margin requirement is $ 10 and the maintenance margin requirement is $ 8. You enter into long 20 contracts and meet all margin requirements, but do not withdraw any excess margin. B. Complete the table below and explain all deposited funds. Suppose the contract was purchased at the settlement price of that day, so there is no gain or loss at current market prices on the day of purchase. C. What is your total profit or loss by the end of Day 6?
Consider a forward contract that expires in 9 months. The underlying asset is worth $250 and the forward price is $285. Suppose we hold the long position in the forward contract. The risk free rate is 8 percent. The appropriate forward price should be: a. $270.00 b. $35.00 c. $285.00 d. $264.85
4. GN Power is a generating company and LANECO is a retailer. These two companies are negotiating a long-term contract for the delivery of electricity and both forecast that the average spot price for the duration of the contract wil1 be 20. 00 $/MWh. If GN Power is less risk averse than LANECO, what is the price that is more likely to result from these negotiations: 21. 00 $/MWh А. В. 20. 00 $/MWh С. 19. 00 $/MWh. Both of these companies must physically trade through the WESM, but they have signed a two-way contract for difference for 100 MWh at 20. 00 $/MWh. If everything happens as planned, describe how trading is settled if the price on the WESM is 23. 00 $/MWh.
A ) A portfolio manager desires to generate $10 million 100 days from now from a portfolio that is quite similar in composition to the S&P 100 index. She requests a quote on a short position in a 100-day forward contract based on the index with a notional amount of $I0 million and gets a quote of $25.2. If the index level at the settlement date is $35.7. calculate the amount the manager will payor receive to settle the contract B) A forward contract covering a $10 million face value of T-bills that will have 100 days to maturity at contract settlement is priced at 1.96 on a discount yield basil. Compute the dollar amount the long must pay at settlement for the T-bills. C) Consider an FRA that: • Expires/settles in 30 days. • Is based on a notional principal amount of $1 million. • Is based on 9O-dayLIBOR. • Specifics a forward rate of 5%. Assume that the annual 9O-day LIBOR 30-days from now (at expiration) is 6%. Compute the cash settlement payment at expiration and identify which…
Don't provide handwritten solution... ALFA’s price is currently ¥8,000. At the end of one month when its options expire, the price is either go up by 5% or down by 15%. If the risk-free is –0.20% for the period, what should be the value of a put with a strike price of ¥7,950? * ¥299.60 ¥333.67 ¥236. 93
You form a long straddle by buying a call with a premium of C = $8, and buying a put with a premium of P= $6. Both options have an exercise price of X $49, both mature in 3 months, and both have the same underlying asset. Find the profit of this straddle when the ending price of the underlying asset is ST = $47. Do NOT use the $ symbol in your answer; just write a numerical value. Of course, include the negative sign if the answer is negative; but do not include the positive sign if the answer is positive. (Acceptable error = 1)
An Indian company has a receivable of USD 100,000 to be collected in one month (June). The manager of the Indian Company decided to hedge its risk through market derivatives. He contacted a Forex trader to check the available alternatives. He was provided the following information: Hedging with a forward contract One-month forward rate: INR/USD= 0.0055 Hedging with a call-option contract Exercise Price: INR/USD= 0,0050 Premium: 5% of the value of the option Contract Size: USD 50,000 Maturity: June Hedging with a put-option contract Exercise Price: INR/USD= 0,060 Premium: 2% of the value of the option Contract Size: USD 100,000 Maturity: June Which derivative is the best for this Indian company if on June the exchange rate is INR/USD= 0.062?
An investor buys 5 future contracts on gold at the MCX.Each contract is for 100 gms. The contract price is Rs 30550 per10 gms. The tick size is Re 1. The initial margin is 4% while minimum margin is 90% of the initial margin. a. What is the minimum change in the value of the contract? b. What is the initial margin? C. At what price level the investor will have a margin call?
(1) A trader signs a Forward contract on April 30 for the delivery of 500 gallons of oil on October 31. The risk-free rate is 5.00% on April 30 and the current price of oil is $30 per gallon. Each gallon of storage costs $0.03 per day.a. What will be the fair forward price on April 30?b. If the spot price of oil is $45 per gallon on July 31, what profit or loss would the trader incur if they close out (cash settle) their position?
5 Consider an asset with current price 26 that provides income 0.50 in 3 months time. The price of a 6-month European call on the asset with strike 24 is ct = 1.75 and the risk free rate is4.5% for all maturities.(i) Show that there is an arbitrage opportunity.(ii) Construct an appropriate arbitrage portfolio to take advantage of the situation and determine the profit per call option used.
A three-month call with a strike price of $25 costs $2. A three-month put with a strike price of $20 and costs $3. A trader uses the options to create a strangle. For what two values of ST does the trader breakeven with a profit of zero, where ST is the stock price in three months?..... And…. Select one: a. $30 and $35. b. $20 and $10. c. $10 and $25. d. $15 and $30.
Calculate the VaR (Value at Risk) of a position based on the following information: market value is $12053, modified duration is 5.9 years, and the potential adverse move in the yield is 31 basis points. Assume the FI is required to hold the position for 6 days.

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