Three months ago an investor purchased a six-month US Treasury bond forwardcontract with a notional value of $10,000,000 at a price of 150. Assume the currentforward price for a contract with three months to maturity is 152, and the risk-freerate is 1.0%. The value of the forward position is:$199,503$100,000$200,000Question 10Assume an asset sells in the spot market for a price of $30. The risk-free rate is 3%,and the forward contract on the asset expires in six months. If the asset pays adividend of $0.75 and storage costs are $0.50 a year, what is the correct forwardprice?$31.25$30.25$30.19

The value of a long (bought) forward contract at any given point of time before the maturity is…

Answered: Three months ago an investor purchased…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 4P

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Assume the Eurodollar futures price at time t0 is 93.83 and the contract expires in 3 months time a. Calculate the 3-month forward rate implied by this price. b. Calculate the repayment amount for bonds with maturities of 3, 6, 9 and 12 months if the investor bought $5 million future contracts. no hand written solution plz
Assume an asset sells in the spot market for a price of $140, the risk-free rate is 5%, and a forward contract expires in ten months. What is the initial value of the contract and the correct forward price? $140 and $143.45 $0 and $145.82 $0 and $134.19
(c) BingBing Co has borrowed a £25 million money market loan, where the interest rate is LIBOR +300 basis points. It is currently 15th May 20X0 and LIBOR is 2.5%. The interest rate is due to be reset for the following 3 months on the 1st July 20X0 (i.e. LIBOR will be reset). The company wishes to hedge its exposure using short term interest rate futures contracts (STIRS). Assume the actual futures price on the 15th May 20X0 is 97. Calculate and discuss the outcome of the hedge if basis is 0.2 and LIBOR is 3% on the 1st July 20X0. The discussion should include basis risk.
Generous Dynamics is planning on buying 3000 ounces of gold in six months. The correlation of the six-month change in the spot and futures price is. 5. The standard deviation of six-month change in spot and futures price are 27 percent and 31 percent, respectively. Futures contract size is 1000 ounces. How many contracts should GD buy or sell to hedge the future purchase? O Sell 1.3065 O Buy 1.3065 O Sell 1.7222 O Buy 1.7222 O Sell 2.6129
An Indian exporter has entered into a sale transaction of pulses for $20,000 for which the payment will be given after two months. If the exporter expects the USD price to fall within two months, calculate his profit if he hedges the risk through forex option as under: USD/INR spot buying rate is 82.50 USD/INR Future 2 months 84.00 Spot rate afterwo months is 83.00
Several months ago, you took a long position on a forward contract for gold. The contract's forward delivery price is $143,000, and it is set to expire in three months. The current spot price of gold is $142,000 and the annual risk-free interest rate is 5% compounded continuously. What is the current value of the forward contract that you are holding? A. SO B. + $786.14 C. - $786.14 D. $143,786
A speculator purchased Barclays Bank Ghana Limited corporate bond for ¢500,000. The bond is expected to yield a coupon payment of ¢50,000 per annum for the next 25 years. At the end of this period, it will be necessary to buy a new bond at cost of ¢700,000 at the same coupon rate so that the speculator can still meet his expenditures. Assuming that the coupon rate is the same as the interest, how should the purchaser provide for this future expenditure and what will be the effect on his percentage yield?
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?
Mr. Sami contacted his FOREX trader and was informed with the following: the spot rate is USD 0.6545/EUR. It is expected that USD may depreciate by 5% after two months. What will be new exchange rate after depreciation? O a. EUR/USD= 0.7872 O b. 1 EUR= 0.6872 USD OC USD/EUR= 0.7582 O d. EUR O.6872/USD
Tango Bank has contracted to lend $80 million to Delta Co. in three months’ time. This loan will be for a period of six months. To hedge against the risk of interest rates dropping, Tango has purchased an interest rate put option. The put option has an exercise rate of 2.15% and a maturity of three months. The underlying forward rate is based on the LIBOR, which has a current term structure of # days LIBOR 90 2% 270 2.3% The terms of the LIBOR specify 30 days in a month and 360 days in a year. The volatility on the underlying forward rate is 0.25. Tango uses the Black Model to estimate the call premium. c. Hindsight being 20-20, should Tango have purchased the put option?
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
Tango Bank has contracted to lend $80 million to Delta Co. in three months’ time. This loan will be for a period of six months. To hedge against the risk of interest rates dropping, Tango has purchased an interest rate put option. The put option has an exercise rate of 2.15% and a maturity of three months. The underlying forward rate is based on the LIBOR, which has a current term structure of # days LIBOR 90 2% 270 2.3% The terms of the LIBOR specify 30 days in a month and 360 days in a year. The volatility on the underlying forward rate is 0.25. Tango uses the Black Model to estimate the call premium. b. Suppose that in three months’ time, the six-month LIBOR turns out to be 2%. What is the annualized rate of return on Tango’s position with the put option?

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