Assignment 4 - Answers

Question 1   (Pricing a forward contract with dividends) The current price of silver is $206 per ounce. The storage cost is $1 ounce per year, payable quarterly in advance. Assuming a constant annual interest rate of 9% compounded quarterly, what is the theoretical forward price of silver for delivery in 9 months? Please submit your answer rounded to the nearest integer - for example, if your answer is 19.819.8, round it to either 2020.

Problem 2: Cost-of-Carry Model. The spot price of silver is $30 per ounce. The continuously compounded interest rate is 6% per year. The quoted six-month forward price for silver is $32. (a) What should the arbitrage-free forward price of silver for a forward contract ma- turing in six months? (b) How would you arbitrage any mispricing?

Problem 31-32 Money-market yields A three-month bill that was issued on an annually compounded yield of 5%. Suppose that one month has passed and the investment still offers the same annually compounded return, answer the following: a. What is the percentage discount? b. Calculate the Monthly return. c. Calculate the present annual yield. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. a. Discount b. Monthly return c. Annual yield % %

Question: (Pricing a forward contract with dividends) The current price of silver is $206 per ounce. The storage cost is $1 ounce per year, payable quarterly in advance. Assuming a constant annual interest rate of 9% compounded quarterly, what is the theoretical forward price of silver for delivery in 9 months? please provide the theoretical forward price of silver for delivery in 9 months.  thank you so much for the help, much appreciated!!

Question 15 What is the present value of your investment if you deposited $100.00 into your bank account at the beginning of each quarter for 10 years if the bank pays interest is 6% compounded semi-annually? a. $2,854.90 b. $3,036.46 c. $1,628.23 d. $3042.28 e. $900.17

Plz answer in 10 mints

Question 18 Not yet answered A company wants to invest some surplus short-term funds and plans to buy a 90- day bank bill with a face value of $100, 000. What is the yield on the bill if the price on the bill is currently $98, 566? (Assume there are 365 days in a year) % Please round your answer to two decimal places.

5.2.4S An investor deposits 50 in an investment account on January 1. The following summarizes the activity in the account during the year: Date March 15 June 1 October 1 Value Immediately Before Deposit 40 80 175 Deposit 20 80 75 On June 30, the value of the account is 157.50. On December 31, the value of the account is X. Using the time-weighted method, the equivalent effective annual yield during the first 6 months is equal to the (time-weighted) effective annual yield during the en- tire 1-year period. Calculate X.

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QUESTION 7 A bank makes a 30 year Fully Amortizing FRM for $2,000,000 at an annual interest rate of 4.125% compounded monthly, with monthly payments.Suppose inflation is 2% per year, compounded monthly. What is the real value of the 20th payment? O A. $9,375.48 O B. $9,050.06 OC. $9,692.99 OD. $6,523.11

QUESTION 2 The future value of 10,000 in 15 years if the interest rate is 12% compounded monthly is between $59,900 and $59,960. Interest is compounded at the end of the period and the initial investment is made at the end of the period, so use "0" for the type argument in the Excel function. True O False

QUESTION 20 Given an interest rate of 8 percent, compute the year 8 future value if deposits of $1,700 and $2,700 are made in years 2 and 3, respectively, and a withdrawal of $650 is made in year 5. (Do not round intermediate calculations and round your final answer to 2 decimal places.) FUTURE VALUE?

Problem 31-30 Money-market yields In January 2020, three-month (91-day) Treasury bills were selling at a discount of 1.44%. What was the annual yield? Assume 365 days in a year. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

Question 6.10 To accumulate 36,419.74 at the end of 3n years, deposits of 174 are made at the end of the first n years, and deposits of 87 are made at the end of each of the next 2n years. The annual effective interest rate is i, and you are given that: (1+1)" = 3 Calculate /. A 7.64% B 10.51% C 10.75% D 14.81% E 15.05%

Problem 31-30 Money-market yields In January 2020, three-month (91-day) Treasury bills were selling at a discount of 1.58%. What was the annual yield? Assume 365 days in a year. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Answer is complete but not entirely correct. Annual yield 6.44 %

Problem 31-30 Money-market yields In January 2020, three-month (91-day) Treasury bills were selling at a discount of 1.58%. What was the annual yield? Assume 365 days in a year. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. X Answer is complete but not entirely correct. Annual yield 6.44 X %

Question 17 An investment of $5 pays interest of 3.5% per week. What will be the value of this investment at the end of 3 years? (assume 52 weeks in one year) OA. $1070.7 OB. $734.5 OC. $112.2 OD. $1318.8

QUESTION 9 Suppose that the forward rate today for the period between 1 year and 2 years in the future is 7% (with annual compounding) and that sometime ago a company entered into an FRA where it will receive 5% (with annual compounding) and pay SOFR (market rate) on a principal of $100 million for the period. Today the 2-year zero rate rate is 6.5%% HINT. What is the valuo of the FRA this company has entered into to get paid 5%, now that the forward rates have gone from 5% to now being 7%? QUESTION 10 if the term structure of interest rates is upward-sloping which is higher (concave)? (a) The 5-year zero rate or (b) The forward rate corresponding to the period between 4.75 and 5 years in the future. What about for a term structure of interost rates that is downward-sloping? OA For downward sloping term structure the Forward Rate will be higher than the Zero Rate and for upward sloping the Zero Rate will be higher than the Forward Rate O B. Forward rates are independent of the Zero…