4. The spot rate of gold is $1,200 per ounce. Please plot the payoff of buying a call option on an ounce of gold with a $50 premium and the strike price equal to $1,200. Payoff 300 250 200 150 100 50 ° 1000 1100 1200 1300 1400 1500 -50 -100 Price
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- Suppose you sell seven March 2021 silver futures contracts on December 4, 2020, at the last price of the day. Use Table 25.2. a. What will your profit or loss be if silver prices turn out to be $25.01 per ounce at expiration? (Enter your answer as a positive value. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What will your profit or loss be if silver prices are $23.13 per ounce at expiration? (Enter your answer as a positive value. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a. b.The 1-year and 2-year forward prices of gold are $420/ounce and $430/ounce. The 2-year swap price for gold is $424.73/ounce. The 1-year spot rate of interest is 5%. Calculate the 1-year forward rate. O A. 11.4% O B. 11.8% O C. 12.1% O D. 12.6% O E. 13.2%Suppose initially that two assets, A and B, will each make a single guaranteed payment of $400 in 1 year. But asset A has a current price of $280 while asset B has a current price of $320. Instructions: Round your answers to 2 decimal places. a. What are the rates of return of assets A and B at their current prices? Return on assetA =| |percent Return on asset B = percent Given these rates of return, which asset should investors buy and which asset should they sell? Buy asset (Click to solect) v and sell asset (Click to select) b. Assume that arbitrage continues until A and B have the same expected rate of return. When arbitrage ends, will A and B have the same price? (Click to select) Next, consider another pair of assets, C and D. Asset C will make a single payment of $600 in 1 year, while D will make a single payment of $800 in 1 year. Assume that the current price of C is $440 and that the current price of D is $680. c. What are the rates of return of assets C and D at their…
- You long a futures contract for 500 units of silver for $60 per unit. The initial margin is $3,000 and the maintenance margin is $2,000. What is the silver price at which you will receive a margin call? A.$62 B.$56 C.$58 D.$64a. If the spot price of gold is $1,500 per troy ounce, the risk-free interest rate is 2%, and storage and insurance costs are zero, what should be the forward price of gold for delivery in one year? Use an arbitrage argument to prove your answer.b. Show how you could make risk-free arbitrage profits if the forward price is $1,550.Given interest rates: o Deposit rate: 0.40% in € & 1.0% in £ o Borrow rate: 0.50% in € & 1.1% in £ • Investment Plan: o You use your own funds: $100 o You can borrow additional funds either €250 or £200 • Spot rates: o EUR/USD = 1.2 & GBP/USD = 1.5 • Expectation: O USD is expected to depreciate by 2.5% against EUR in 1 month. o USD is expected to appreciate by 1.5% against GBP in 1 month. Cross rates a. GBP (appreciates/depreciates) against EUR by b. EUR (appreciates/depreciates) against GBP by
- consider a one-year forward contract on gold. Suppose that it costs $2 per ounce per year to store gold with payment being made at the end of the year. Assume that the spot price is $450 per ounce and the risk-free rate is 7% per annum for all maturities. Assume continuous compounding. (a) What is the forward price F (0, 1) that does not result in arbitrage profit? (b) If the forward price is $460, do you get any arbitrage profit opportunity? If so, what is your strategy? (You need to provide more than "buy low, sell high".)Choose the best answer Compute the future value in year 5 of a $2,000 deposit in year 1 and another $2,500 deposit at the end of year 3 using a 6% interest rate. a. $5,333.95 b. $5,653.99 c. $5,850.00 d. $6,022.02Assume you have the following asset and liability in your Balance Sheet: Asset - Bond A Modified Duration = 2.6 years Value = RM1.5 million Liability - Bond B Modified Duration = 3.1 years Value = RM1.0 million a. Calculate the duration gap. b. What is the expected change in Net Worth if interest increases by 1%? Assume previous interest is 10% c. What should or could you to achieve immunised balance sheet? Note: Please show all workings.
- Determine the present value P you must invest to have the future value A at simple interest rate r after time t. A = $19,000, r = 11.5%, t = 4 years The present value that must be invested to get $19,000 after 4 years at an interest rate of 11.5% is $. (Round up to the nearest cent.)Solve the following problem using the present worth analysis for an interest rate of 8%. Alt. A Alt. B Alt. B Initial cost $1,700 $2,100$3,750 Benefit/year 1,000 |1,000 1,000 Life in years|2 3 6Using the spot rate of pounds quoted at $1.624-31, if you would like to convert $10,000 to pounds, and then converting back to dollars, the last dollar value would be ________. A. $8,932.45 B. $9,423.93 C. $9,957.08 D. $8,751.22