A "three-against-nine" FRA has an agreement rate of 4.77 percent. You believe six-month CME Term SOFR in three months will be 5.135 percent. You decide to take a speculative position in an FRA with a $1,000,000 notional value. There are 183 days in the FRA period. Determine whether you should buy or sell the FRA and what your expected profit will be if your forecast is correct about the six-month CME Term SOFR rate. Note: Round your intermediate calculations to 6 decimal places. Round your answer to 2 decimal places. Assume 360 days in a year. for an expected profit of

A "three-against-nine" FRA has an agreement rate of 4.77 percent. You believe six-month CME Term SOFR in three months will be 5.135 percent. You decide to take a speculative position in an FRA with a $1,000,000 notional value. There are 183 days in the FRA period. Determine whether you should buy or sell the FRA and what your expected profit will be if your forecast is correct about the six-month CME Term SOFR rate. Note: Round your intermediate calculations to 6 decimal places. Round your answer to 2 decimal places. Assume 360 days in a year. for an expected profit of

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 2DQ: A company could sell a building for 250,000 or lease it for 2,500 per month. What would need to be...

See similar textbooks

Similar questions

A “three-against-nine” FRA has an agreement rate of 4.79 percent. You believe six-month CME Term SOFR in three months will be 5.145 percent. You decide to take a speculative position in an FRA with a $1,000,000 notional value. There are 183 days in the FRA period. Determine whether you should buy or sell the FRA and what your expected profit will be if your forecast is correct about the six-month CME Term SOFR rate.
Show work and discuss result after Finding the approximate market value of a long position in an FRA at a fixed rate of 5 percent in which the contract expires in 20 days, the underlying is 180-day LIBOR, the notional principal is $25 million, the 20-day rate is 7 percent, and the 200-day rate is 8.5 percent
Sun Life Financial Trust offers a 360 -day short -term GIC at 0.65 %. It also offers a 120 -day short - term GIC at 0.58 % You are considering either the 360 -day GIC or three consecutive 120 -day For the 120 -day GICS , the entire maturity value would be "rolled over " into the next GIC. Assume that the posted rate increases by 0.1 % upon each renewal If you have $115,000 to invest , which option should you pursue and how much more interest will it earn?
Suppose a party wanted to enter into an FRA that expires in 42 days and is based on 137-day LIBOR. The dealer quotes a 4.75 percent rate on this FRA. Assume that at expiration the 137-day LIBOR is 4 percent and the notional principal is $ 20,000,000. Calculate the FRA payout for a long position.
A Firm buys an FRA on 90-day LIBOR expiring in 30 days with Notional principal of $20 million. The contract rate is 10%. If at expiration, LIBOR is 8%, how much will the long has to pay to the short i.e., seller of FRA. What happens if at expiration, LIBOR is 12%?
Suppose that a party wanted to enter an FRA that expires in 121 days and is based on 55-day LIBOR. The dealer quotes a rate of 0.049 on the FRA. Assume that at expiration, the 55-day LIBOR is 0.029, and the notional amount is USD10,000,000. What is the payoff of the FRA short position?
A “three-against-nine” FRA has an agreement rate of 4.76 percent. You believe six-month LIBOR in three months will be 5.14 percent. You decide to take a speculative position in a FRA with a $7,000,000 notional value. There are 182 days in the FRA period. Determine what your expected profit will be if your forecast is correct about the six-month LIBOR rate. (USD with cents)
A “three against nine” FRA has an agreement rate of 4.94 percent. You believe six-month LIBOR in three months will be 5.220 percent. You decide to take a speculative position in a FRA with a $1,000,000 notional value. There are 183 days in the FRA period. Determine whether you should buy or sell the FRA and what your expected profit will be if your forecast is correct about the sixmonth LIBOR rate. (Do not round intermediate calculations. Round your answer to 2 decimal places.
A leasing contract calls for an immediate payment of $100,000 and nine subsequent $100,000semiannual payments at six month intervals. What is the PV of these payments if the annual discount rateis 8 percent? do not use excel
2-23 We have a three-month forward rate agreement (FRA) with underlying 90 day LIBOR starting on Jan 1, in a non-leap year. The notional amount is $15 million. The LIBOR term structure is as follows: 90-day LIBOR = 3% 180-day LIBOR = 3.25% What are the values of the following variables necesssary in the calculation of the fixed rate on our FRA. No calculations need to be shown. h = ? m + ? h+m + ? L0(h) = ? L0(h + m) = ?
Assume an investor bought a one-year forward contract with price F0(T) = 110. Six months later, at Time t = 0.5, the price of the stock is S0.5 = 115 and the interest rate is 4%. The value of the existing forward contract expiring in six months will be closest to: * 5. 7. -7.
Assume that we entered into a one-year forward contract with price $300 today. Nine months later, the observed price of the stock is $350 and the interest rate is 8% per annum. The value of the existing forward contract expiring in three months will be closest to: A. 49.05. B. 55.72. C. –55.72. D. −49.05.