Consider a six-month futures contract on the FTSE 100. Assume the stocks underlying the index provide an annual dividend yield of 6.2% and the value of the index is 6754.5. Calculate the price of the index (to the nearest full index point) if the continuously compounded risk-free interest rate is (i) 6.9% and (ii) 5.

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A: PRESENT VALUE (CURRENT MARKET PRICE) 899.35 NPER (n) (MATURITY YEARS) 10 PMT (COUPON AMOUNT) 65…

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A:

Q: Assume that the current yield on one-year securities is 7 percent, and that the yield on a two-year…

A: one year forward rate is calculated below-1+0.06+0.0041-1+f1,11=1.0721+f1,1=1.14491.064

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Q: The Treasury bond futures contract has a target price of 89-8. What is the estimated annualized…

A: $1000*(89+8/32)/100 = 892.50 Value of contract- = 892.50*100 = $89,250

Q: The current stock price for XYZ ltd is sh. 85. A European call option with an exercise price of sh.…

A: Standard deviation = σT = σ160 Standard Deviation = σ12.65 σ=44512.65  = 2.93% T = 160 r = 5.18% S0…

Q: the multiplier of a futures contract on the stock market index is $250. The maturity of the contract…

A: Frist we need to calculate cash flow from the mark-to-market proceeds on the contract. Thereafter…

Q: Suppose the stock price is $20 today. In the next six months it will either fall by 50 percent or…

A: Let S denote the share price, r risk free rate, up-factor (u) = 1.50 and down factor (d) = 0.50…

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A: Here, Theoretical price of the futures contract is ‘Fo’ The spot price is ‘So’ Risk-free interest…

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A: Given: Particulars Amount Stock price 100 Interest rate 5% Exercise price  100

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A: "Hi, Thanks for the Question. since you asked multiple question, we will answer the first question…

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A: Calculate the inflation premium at year 3 as follows: Therefore, the inflation premium is 2.82%.

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A: “Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

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Q: A 3-month European call on a futures has a strike price of $100. The futures price is $100 and the…

A: Strike Price (S)= $100 Future price (K)= $100 Volatility= 20% Risk-free rate (r)= 2% per annum with…

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A: Excel Spreadsheet: Excel Workings:

Q: The multiplier for a futures contract on a stock market index is $50. The maturity of the contract…

A: a. Calculation of the initial future price at the current level is as follows:   Calculation of the…

Q: A stock price is currently $100. Over each of the next two six-month periods it is expected to go up…

A: First of all we will have to establish the probability of Up move, for that we will use the…

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A: The formula for calculating the futures price is as below: Future price at time T = Spot price x…

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.