The current spot price for one ounce of gold is 1,238.74. Company A and Company B enter into two forward contracts; one expires at the end of 6 months and the other expires at the end of 9 months. Each forward contract calls for a physical exchange of 100 ounces of gold. The spot price for one ounce of gold 6 months from today is 1,263.76 and coincidentally, that is the spot price for one ounce of gold in 9 months. Company A is short in both contracts (and hence Company B is long in both). Each contract is held to expiration. The continuously compounded interest rate is 4%. What is the total profit realized by Company B after 9 months? Possible Answers A-1,271 11 0 c 1,271 D 2,502 3,773

The current spot price for one ounce of gold is 1,238.74. Company A and Company B enter into two forward contracts; one expires at the end of 6 months and the other expires at the end of 9 months. Each forward contract calls for a physical exchange of 100 ounces of gold. The spot price for one ounce of gold 6 months from today is 1,263.76 and coincidentally, that is the spot price for one ounce of gold in 9 months. Company A is short in both contracts (and hence Company B is long in both). Each contract is held to expiration. The continuously compounded interest rate is 4%. What is the total profit realized by Company B after 9 months? Possible Answers A-1,271 11 0 c 1,271 D 2,502 3,773

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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XYZ Corp. entered into a long forward contract for 125 pieces of 1-ounce silver at a fixed price of P1,320 to be delivered one year from now. Its current price is P1,330. After one year, the price of silver was P1,340. What is the purchase price that XYZ will be paying for its order?
The current spot price for one ounce of gold is 1,238.74. Company A and Company B enter into two forward contracts; one expires at the end of 6 months and the other expires at the end of 9 months. Each forward contract calls for a physical exchange of 100 ounces of gold. The spot price for one ounce of gold 6 months from today is 1,263.76 and coincidentally, that is the spot price for one ounce of gold in 9 months. Company A is short in both contracts (and hence Company B is long in both). Each contract is held to expiration. The continuously compounded interest rate is 4%. What is the total profit realized by Company B after 9 months? Possible Answers : A. -1,271 B. 0 C. 1,271 D. 2,502 E. 3,773
On March 1, 2024, Gold Examiner receives $157,000 from a local bank and promises to deliver 106 units of certified 1-ounce gold bars on a future date. The contract states that ownership passes to the bank when Gold Examiner delivers the products to Brink’s, a third-party carrier. In addition, Gold Examiner has agreed to provide a replacement shipment at no additional cost if the product is lost in transit. The stand-alone price of a gold bar is $1,410 per unit, and Gold Examiner estimates the stand-alone price of the replacement insurance service to be $90 per unit. Brink’s picked up the gold bars from Gold Examiner on March 30, and delivery to the bank occurred on April 1. Required: 1. How many performance obligations are in this contract? 2. to 4. Prepare the journal entry Gold Examiner would record on March 1, March 30, and April 1.
On March 1, 2018, Gold Examiner receives $147,000 from a local bank and promises to deliver 100 units ofcertified 1-oz. gold bars on a future date. The contract states that ownership passes to the bank when Gold Examiner delivers the products to Brink’s, a third-party carrier. In addition, Gold Examiner has agreed to provide areplacement shipment at no additional cost if the product is lost in transit. The stand-alone price of a gold bar is$1,440 per unit, and Gold Examiner estimates the stand-alone price of the replacement insurance service to be $60per unit. Brink’s picked up the gold bars from Gold Examiner on March 30, and delivery to the bank occurred onApril 1.Required:1. How many performance obligations are in this contract?
Assume that a future and a forward contract written on silver have one day to maturity. Assume that the forward price is $24 /ounce and the future price is $25 /ounce. Suppose that the spot price for silver will be either $23.5 of $25.5. Show the arbitrage opportunity. (Future contracts have cash settlement
On March 1, 2024, Gold Examiner receives $148,000 from a local bank and promises to deliver 100 units of certified 1-ounce gold bars on a future date. The contract states that ownership passes to the bank when Gold Examiner delivers the products to Brink's, a third- party carrier. In addition, Gold Examiner has agreed to provide a replacement shipment at no additional cost if the product is lost in transit. The stand-alone price of a gold bar is $1,410 per unit, and Gold Examiner estimates the stand-alone price of the replacement insurance service to be $90 per unit. Brink's picked up the gold bars from Gold Examiner on March 30, and delivery to the bank occurred on April 1. Required: 1. How many performance obligations are in this contract? 2. to 4. Prepare the journal entry Gold Examiner would record on March 1, March 30, and April 1. Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 How many performance obligations are in this contract? Number of…
On March 1, 2024, Gold Examiner receives $139,000 from a local bank and promises to deliver 94 units of certified 1-ounce gold bars on a future date. The contract states that ownership passes to the bank when Gold Examiner delivers the products to Brink's, a third- party carrier. In addition, Gold Examiner has agreed to provide a replacement shipment at no additional cost if the product is lost in transit. The stand-alone price of a gold bar is $1,410 per unit, and Gold Examiner estimates the stand-alone price of the replacement insurance service to be $90 per unit. Brink's picked up the gold bars from Gold Examiner on March 30, and delivery to the bank occurred on April 1. Required: 1. How many performance obligations are in this contract? 2. to 4. Prepare the journal entry Gold Examiner would record on March 1, March 30, and April 1. Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 Prepare the journal entry Gold Examiner would record on March 1,…
Platinum contracts are trading at $950. NYMEX defines the Platinum contract as 50 ounces/c, $/c, $11,000, $8,000. Your commodities broker quotes you $13/ounce storage and insurance, $160/ounce borrowing fee on platinum, and 8.0% on cash balances - all per annum. JQ Investor decides to arbitrage this price difference using 500 ounces of Platinum. If JQ takes this arbitrage right to delivery, what is the per ounce cost of carry for the transaction (enter as a positive number)
On December 12, year 11, Imp Co. entered into three forward exchange contracts, each to purchase 100,000 LCU's in 90 days. The relevant exchange rates are as follows:Spot rate Forward rate(for March 12, year 12)December 12, year 11 $0.88 $0.90December 31, year 11 $0.98 $0.93Imp entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Imp specifications. At December 31, 2022, what amount of foreign currency transaction gain should Imp include in income from this forward contract?a. $0b. $3,000c. $5,000d. $10,000
Suppose that two counterparties, A and B, enter a three-month forward contract on January 1st, whereby A buys USD1 million at a forward rate of AUD/USD 1.7662. On March 1st, A decides it no longer needs to buy USD1 million on 31 March, so it enters a one-month forward contract to sell USD1 million on 31 March at a forward rate of AUD/USD 1.8000 from counterparty C. a) Calculate the net cost to counterparty A, before transaction costs. b) Suppose a German importer owes an Australian exporting company 150,000 AUD, due in three months. ?_0 (EUR/AUD) 0.60 Se (EUR/AUD) 0.50 (0.3) and 0.65 (0.7) Premium on AUD call option R = EUR0.02 Exercise exchange rate E = 0.62 Time to expiry 3 months 1) What is the expected spot rate? 2) What is the expected value of payables in AUD under hedge? 3) Will the option to hedge be undertaken on the basis of…
A contract between two parties (company X & Y) was created such that in return for services rendered, company X would provide payments of $15,000 in 8 months, $35,000 in 16 months, and $40,000 in 24 months. However, a clause was inserted in the contract that allowed company X to pay two equal lump sum payments in months 30 and 36. If interest on the contract is 6.5% compounded annually, determine the value of the lump sum payments that should be written in the contract. When entering your answer, round your values to two decimal places, and use a $ symbol as well as the correct comma separator. For example $12,345.67 Answer: Answer
A bank has entered into a forward contract to sell 50,000 ounces of gold at $1,500 per ounce with a remaining life of 6 months. The current price of gold is $1,292.40 per ounce and the risk-free interest rate is 2% p.a. (continuously compounded). What is the credit equivalent amount of the bank’s position, i.e., max(V,0) + a*L, under Basel I? Assume the add-on factor is equal to 1.0% the principal. a. Zero b. $750,000 c. $9.6 million d. $10.4 million

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