Consider a hypothetical futures contract where the current price is $ 212. The initial margin requirement is $ 10 and the maintenance margin requirement is $ 8. You enter into long 20 contracts and meet all margin requirements, but do not withdraw any excess margin. B. Complete the table below and explain all deposited funds. Suppose the contract was purchased at the settlement price of that day, so there is no gain or loss at current market prices on the day of purchase. C. What is your total profit or loss by the end of Day 6?

Q: A one-year gold futures contract is selling for $1,247. Spot gold prices are $1,200 and the one-year…

A: The spot price and the risk-free rate can be used to compute the future price. If the calculated…

Q: A one year gold futures contract is selling for $1,685. Spot gold prices are $1,610 and the one year…

A: fair value of futures = Spot rate * (1+risk free rate )^n

Q: The following table shows the futures price data today for Commodity X, and you purchased a futures…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: You created and sold a futures contract 25 days ago. The contract at that time had a price of $60…

A: The rate of return of an investment with zero risk is known as the risk-free rate of return. It can…

Q: On Monday morning you sell one June T-bond futures contract at $97,843.75. The contract's face value…

A: Short position at $97,843.75 Short position means sell futures with out holding them, hoping for the…

Q: The futures price of a commodity such as wheat is $2.50 a bushel. Futures contracts are for 10,000…

A: Given, Futures price = $2.5 a bushel No.of contracts = 10,000 bushels Margin requirement = $2500 per…

Q: Demonstrate how a Margin Account operates for both the Long and the Short futures position using the…

A:

Q: How to pricing the future contract over times. For example the spot price at t=0 is $1050, risk free…

A: Here, Spot Price at t=0 is $1,050 Risk Free Rate is 7% Dividend Yield is 5% Storage Cost is 1% Time…

Q: Assuming we have the following immediate interest rates in the market: 1M - 2.5%, 2M - 2.8%, 3M -…

A: Note: FRA 1v2 means forward rate for 1month bought after 1 month i.e. for the month between 1 and 2…

Q: 1. Assume a futures price of Php5000 at the start of the transaction, with Php250 initial margin…

A: Hi there, thanks for posting the questions. But as per our Q&A guidelines, we must answer the…

Q: Assume that the price of a forward contract is 127.87. The European options on the forward contract…

A: Given: Spot price St = 127.87 Exercise price K = 150 Time "t"= 60 days = 60/365 =0.164383561643836…

Q: In May 2012, a bank will issue a 4/7 FRA referenced to BBSW with a guaranteed rate of 4.5% p.a..…

A: The question is based on the concept of Forward rate agreement and its trading to earn arbitrage.…

Q: ppose you buy a 100-strike call at a premium of $19.46, sell a 120-strike call at a premium of…

A: Put call parity Put call parity gives the relationship between put and call option that have the…

Q: Suppose that you have calibrated both HL and BDT models to the yield curve and are trying to price a…

A: The forward contract is that contract in which the one party has agrees to other party of obligation…

Q: What would be your dollar return had you purchased a single contract at the call premium when the…

A: The difference between the selling price and the current price of an underlying asset is known as a…

Q: You expect the value of the Japanese Yen to weaken relative to the U.S. dollar. The Yen futures…

A: Futures contracts help to mitigate or reduce the risk against adverse movement in the price of the…

Q: Assume today's settlement price on a CME EUR futures contract is $1.3160/EUR You have a…

A: Marking-to-market is a process of daily settling the losses and gains arising out of fluctuations in…

Q: Suppose the initial margin on heating oil futures is $8,400, the maintenance margin is $7,200 per…

A: Given information: Initial margin is $8,400, Maintenance margin is $7,200 Contract represents 42,000…

Q: Consider a hypothetical futures contract in which the current price is $82. The initial margin…

A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: Suppose that you purchase a Treasury bond futures contract at $95 per $100 of face value.  What is…

A: The obligation is to buy the bond @$95 at a specified future date

Q: Suppose you work as a broker in an investment company, and there is an expectation that the market…

A: CD are issued at discount to the face value of CD so price of CD is always some value below face…

Q: The Mexican peso futures contract is trading at 0.07713 $/MXN. Contract size for the Mexican peso…

A: Futures contract: It is a legal contract to either buy or sell at a fixed price a certain asset or…

Q: Suppose that, in each period, the cost of a security either goes up by a factor of 2 or goes down by…

A: We have two options here, first is doubling and second is moving down by half. We assume that the…

Q: e. If the futures price continues to decline to $2.32, how much does the speculator have in the…

A: Future are traded in market to earn profit by hedging.

Q: Consider a hypothetical futures contract where the current price is $ 212. The initial margin…

A: When the initial margin falls below $8, we will have to make a margin call, so let us presume the…

Q: Futures are available on 3 month T bills with a contract size of $2 million. If you take a long…

A: Gain =selling price less long price

Q: An off-market forward contract is a forward where either you have to pay a premium or you receive a…

A: Effective annual rate is 11% S-R Index value is $1000 Time period 1 year.

Q: suppose that Mr. Binda buys a three-month 5,000 contracts to buy 'commodity-X at a futures price of…

A: The margin requirements are imposed as a necessary requirement incase of volatility. In volatile…

Q: Assume today's settlement price on a CME EUR futures contract is $1.3160/EUR. You have a short…

A: A short position states that the bond account will suffer losses if the settlement prices rise and…

Q: 1) Who takes the long futures position? Who takes the short position? 2) At Month 0, what is the…

A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: A trader takes a view that March KLSE CI futures which are currently trading at 1188.60 are about to…

A: Current trading price is 1188.60 Investors Vie is bearishness in stock Contract size is RM 50 per…

Q: Demonstrate how a margin account operates for both the long and the short futures position using the…

A: Long position means we will buy futures now and sell them in future expecting the price increased.…

Q: You are in a situation where the initial margin on heating oil futures is $8,400, the maintenance…

A: The Margin Call: On each futures contract, the margin call is issued if the value of the position at…

Q: A trader creates a LONG STRADDLE for GBP/USD with a strike price of 1.2457. The call option premium…

A: Long straddle: This option holder will buy a call option and a put option on a stock simultaneously.…

Q: Consider a 6-months futures contract on gold. We assume no income and that $1 per ounce per 6-months…

A: The current market price at which a specific asset, such as securities, commodities, or currencies,…

Q: Demonstrate how a Margin Account operates for both the Long and the Short futures position using the…

A: Excel Spreadsheet: Excel Workings:

Q: Consider Commodity Z, which has both exchange-traded futures and option contracts associated with…

A: There is a specific relationship that exists between the call premium  and the put premium for an…

Q: Demonstrate how a Margin Account operates for both the Long and the Short futures position using the…

A: The question is based on the concept of margin in trader’s account for future contract.

Q: Fred enters into a futures contract to buy 10,000 pounds of cotton for $8 per pound. The initial…

A: In this we have to calculate the margin when prices fell down.

Q: Suppose a oil producer wants to hedge against possible price fluctuations in the market. For…

A: Basis in derivative market is very important.

Q: A trader enters into a short cotton forward contract when the forwards price is 50 cents per pound.…

A: Forward contract short position is where under which an investor decides to sell the asset…

Q: onsider the pricing of a futures contract on copper. What would you expect to happen if storage…

A: Future contracts are to be settled after some period of time but they derive their value from the…

Q: What is your net gain or loss if Hendreeks is selling for $90 at expiration? For $110? What is the…

A: Total no. of shares = No. of option contracts x No. of shares in one contract…

Q: A trader creates a SHORT STRADDLE for GBP/USD with a strike price of 1.3865. The call option premium…

A: Option contracts are derivative contracts where buyer of the option can buy (call option)or sell…

Q: What is the optimal hedge ratio for a three-month contract? What does it mean?

A: NOTE: As per our policy, we only answer one question when many questions are posted. Therefore,…

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.