GF510_Unit 4 Assignment 1_Andrews, Tradawnya

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Question 7   A. What is the basic difference between a forward contract and a futures contract? How important is this difference in determining the contract prices? B. Is the “forward price” the same thing as the “value of the forward contract” Explain. C. A forward contract exists for a unit of two-year government securities with delivery to take place three years from now. Suppose the price of these securities three years from now is uniformly distributed from a low $800 to a high of $1,400. The one-year expected riskless rate of interest is 5 percent for all periods under consideration. (i). If investors are risk neutral, what should be the current forward price? (ii). Suppose now that investors are risk averse and that the forward price is $1,200. What do you know about the relationship between the market value of two-year government securities and overall consumption? (iii). Continue to assume (as in (ii)) that the current forward price (at time 0) is $1,200. One year from now (at…

9) Exercise A-5 (Static) Derivatives; interest rate swap; fixed rate debt; extended method [LOA–6] On January 1, 2021, LLB Industries borrowed $200,000 from Trust Bank by issuing a two-year, 10% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. Its intent was to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. The agreement called for the company to receive payment based on a 10% fixed interest rate on a notional amount of $200,000 and to pay interest based on a floating interest rate. The contract called for cash settlement of the net interest amount quarterly. Floating (LIBOR) settlement rates were 10% at January 1, 8% at March 31, and 6% at June 30, 2021. The fair values of the swap are quotes obtained from a derivatives dealer. Those quotes and the fair values of the note are as follows:    January 1 March 31…

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Acme Chemical, Inc. is a major manufacturer of chemical products for the agricultural ndustry, including pesticides, herbicides and other compounds. Due to a number of law suits elated to toxic wastes, Acme Chemical has recently experienced a market re-evaluation of its common stock. The firm also has a bond issue outstanding with 10 years to maturity and an annual coupon rate of 5 percent, with interest paid semi annually. The required nominal market annual interest rate on this bond has now risen to 10 percent due to the high risk level associated vith this firm. The bonds have a par or face value of $1,000. 1. Label each of the variables that you would use to determine the value of this bond in the market today: N (time periods until maturity) PMT (periodic interest payment) I per (periodic market interest rate) EV (future value to be received when the bond matures) = 2. Based on the variables that you have identified in Question #1, what is the market value. today (the present…

which one is correct please confirm? Q16: "If you purchase a $100,000 interest-rate futures contract for 105, and the price of the Treasury securities on the expiration date is 108"     your profit is $3000     your loss is $3000     your profit is $8000     your loss is $8000

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Question #2: Futures Contracts The chart below shows a quote for a futures contract on the NASDAQ 100 Index Delivery Date Futures Price NASDAQ 100 November 2020 9325.75 (a) This futures contract is an example of a(n) contract. Circle yŅır answer. No explanation is required Financial Futures Commodity Futures Interest Rate Futures Currency Futures (b) Assume that for the NASDAQ Futures contract the futures price is multiplied by a multiple of $100 to get the total contract value. If the margin requirement is 7%, how much must you deposit into your margin account to purchase three (3) November 2020 NASDAQ contracts? (c) Suppose the day after you purchased the 3 contracts, the NASDAQ 100 Index rises to 9400. What will happen to your margin account? (d) Suppose the NASDAQ 100 Index futures price rises by 5%. What is the percentage return on your investment on the 3 futures contracts?

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question 14  please quickly thanks !!!

Use 3 of Futures Contracts - pure speculation with leverage effect to +92U Example 8: Today, the gross price of a 5-year bond with $1,000 principal amount is 103.199. At the same moment, the price of the 5-year (meaning 5-year maturity for the underlying bond) future contract that expires in three months is 101.521. Its nominal amount is $1,000,000, and the deposit margin is $5,000. gnivhsbm od vu8 (9) An investor with $1,000,000 at disposal anticipates that rates will decrease in a short-term period. He can either invest in the bond or invest in the future contract. Two months later, the price of the bond turns to be 105.227 as the future price turns to be 103.537. Questions: 1) if investor invests in the bond, what is his profit or loss in two months? atqz I 2) if investor invest in the future contract, what is his profit or loss in two months?

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Question 10 The 3-month June 2023 dollar interest rate futures contract is currently priced at 95.50. The contract has a nominal value of 1 million dollars. (i) What is the party that sells the dollar interest rate futures contract agreeing to?  (ii) If you think the 3-month spot interest rates on the dollar will be around 6% in June 2023 would you buy or sell the contract? Explain your reasoning.  (iii) How much profit in dollars would you make if you take the action based on part (ii) and are proved right i.e., the 3-month interest rate on the dollar is 6% in June 2023.  (iv) What 3-month dollar interest rate in June 2023 will give a break-even position for the seller of the contract? (v) What is the profit (+) or loss (-) for the buyer of the contract if the 3-month dollar interest rate in June 2023 is 2%?

Question 4David sells  an SAP 500 futures contract with a September settlement date when the index is 1650 By the settlement date, the S&P 500 index fall to 1360, The reum on David postion in the SAP 500 futures conrct is_____percent

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D & R A1 5 - 1 Question 5. Pricing Option on Futures Today is September 1. A futures contract on crude oil expiring on December 20 of the same year has a futures price of $44.70. The volatility on the futures contract is 23%, and the continuously compounded risk-free rate is 2%. Assume that there are 365 days in a year. What is the Black model price of a European call option on this futures contract, expiring on December 20 and with an exercise price of $46?

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D & R A1 5 - 2 Question 5. Pricing Option on Futures Today is September 1. A futures contract on crude oil expiring on December 20 of the same year has a futures price of $44.70. The volatility on the futures contract is 23%, and the continuously compounded risk-free rate is 2%. Assume that there are 365 days in a year. What is the Black model price of a European put option on this futures contract, expiring on December 20 and with an exercise price of $50?

Question 5 – Futures Arbitrage You are a financial advisor at Festo Ltd. Your client would like to explore the possibility of an arbitrage opportunity on the following futures contract. The futures contract will expire in 9 months. The underlying asset is a non-dividend paying share that is currently trading at a price of R120 per share. The risk-free interest rate per month is 0.67%. The current futures price is R125, however, the intrinsic or fair value of the futures is estimated to be R127.43.Required:5.1. Ignoring transaction and other costs, detail the appropriate arbitrage strategy. 5.2. Discuss any two differences between futures and forwards contracts.

Problem 2-1 (LG 2-6) A particular security's equilibrium rate of return is 8 percent. For all securities, the inflation risk premium is 1.95 percent and the real risk-free rate is 3.2 percent. The security's liquidity risk premium is 0.25 percent and maturity risk premium is 0.95 percent. The security has no special covenants. Calculate the security's default risk premium. (Round your percentage answer to 2 decimal places. (e.g., 32.16)) Default risk premium

Q 18 Calculate the price of a 5.2 percent coupon bond with 18 years left to maturity and a market interest rate of 4.6 percent. (Assume interest payments are semiannual.) (Do not round intermediate calculations. Round your final answer to 2 decimal places.) BOND PRICE______   Is this a discount or premium bond?multiple choice premium bond discount bond

07:34 ET N W(0) Problem 1: 5.74% of 2026 GOI security is trading at 6.96 YTM. If the security experiences a 100 basis points hike. Calculate PV01 for 69 such securities. NOTE: Assume the face value of the security to be 100 . Problem 2: 2031, 6.68% GOI security with YTM 7.05% with a face value of 100 undergoes an increase in the YTM by 75 basis points. Calculate the PV01. NOTE: There is only o

Question 7 DiDi Global filed for an initial public offering on June 30, 2021. An initial public offering is ar example of a market transaction. secondary futures O primary money

MC Qu. 41-16 When investors purchase a security... When investors purchase a security, they are buying which of the following? Multiple Choice O Only bonds Only stock A piece of paper What the paper represents