Suppose an investor sells 100 stocks by short selling for 6 months, the stock price is 30 yuan, and the annual interest rate of 6 months is fixed at 3%. How can I use forward contracts to avoid risks? What is the execution price? Please analyze if the stock price rises to 35 yuan or falls to 25 yuan after 6 months of hedging, what are the losses of this investor?

Q: Suppose you bought a bond with an annual coupon rate of 7.1 percent one year ago for $894. The bond…

A: Bonds: Bonds are the liabilities of the company which is issued to raise the funds required to…

Q: a) When the December gold futures contract was trading at US$408 per 10 gram, expecting a fall in…

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

Q: are a financial manager and you have bonds worth $3,000,000 in your portfolio which have a 7 percent…

A:

Q: A stock is currently trading for $40 per share. The stock will pay no dividends. The annual…

A: Standard disclaimers “Since you have posted a question with multiple subparts, we will solve first…

Q: You have shorted a put option on Ford stock with a strike price of $15. When you sold (wrote) the…

A: Payoff to a Short Put option The writer or seller of the put option is required to buy the stock at…

Q: The price of Stock Y, which is currently $80, can go to $120, $90, or $60 in 6 months’ time.…

A: Assume that P1, P2, and P3 are the probabilities that the price of the stock increases upto $120,…

Q: Suppose that an investor buy a call option on IBM stock with strike price X = 60 USD, which has 6…

A: A call option is a type of contract where the buyer of the call option has the choice of buying the…

Q: You work in a derivatives section in an investment bank. In August, a customer who holds Texa stock…

A: Put option:- It gives an selling right to an holder not an obligation. to sell a security at a…

Q: Need help on both

A: a.In this situation, an investor can gain maximum with a limited loss and that would be possible if…

Q: A writer sells 100 call options with strike $46 for $0.94 each and deposits these premiums in a…

A: A writer receives the premium for the call option sold. He receives $0.94 per option.The amount he…

Q: OneChicago has just introduced a single-stock futures contract on Brandex stock, a company that…

A: a. The calculation of the futures price is as follows: Hence, the futures price is $127.20.

Q: What is the future value of $5,000 invested for 4 years at 7.5% interest compounded continuously?

A: The concept of time value of money will be applicable for question 1.  To determine future value we…

Q: An investor purchases a call option with an exercise price of $55 for $2.60. The same investor sells…

A: Buy call $55 for 2.60 Sold call $60 for 1.40 Closing price=55.75 interest rate =4%

Q: You happen to be checking the newspaper and notice an arbitrage opportunity. The current stock price…

A: Given Information: Current stock price = $20 per share One year risk free interest rate = 8% Strike…

Q: Suppose you had just gone long (purchased) on lot of Syarikat XYZ stock at a price of RM 15.00 each,…

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

Q: Consider a long forward contract to purchase a coupon-bearing bond whose current price is $910. We…

A: Forward contract as the name suggests is not related to the present scenario. It means the buying…

Q: A manager is holding a $1 million bond portfolio with a modified duration of 8 years. She would like…

A: The computation of the dollar worth of T-Bonds as follows:

Q: When you sell a 1-month straddle on ABC stock at a volatility of 30% and actual (realized)…

A: Stock volatility can be defined as the rate which influences the price of stock in such a way that…

Q: Rebecca is interested in purchasing a European call on a hot new stock, Up, Inc. The call has a…

A:

Q: Suppose you buy 700 shares of XYZ currently trading at $63 per share with a loan from your broker.…

A: If you buy shares on margin then you don't need to pay entire purchase value from your pocket. you…

Q: You would like to be holding a protective put position on the stock of XYZ Co. to lock in a…

A: Solution- (A) Calculate the cost of put, when put option is traded Use the following given data for…

Q: You would like to be holding a protective put position on the stock of XYZ Co. to lock in a…

A: Put option is one of the options which gives the holder the right to sell the assets underlying the…

Q: You are bearish on Telecom and decide to sell short 280 shares at the current market price of $100…

A: Cash or securities to be put into brokerage account = Initial Margin * (Shares * Price)

Q: uppose that Ace Insurance Company forecasts that stock market prices are going to increase…

A: We need to compute the amount company has invested in futures.

Q: You are bearish on Telecom and decide to sell short 100 shares at the current market price of $47…

A: A margin call takes place once the value of an individual's margin account falls below the required…

Q: You have shorted a put option on Ford stock with a strike price of $13. When you sold (wrote) the…

A: Here, Exercise Price is $13 Put Premium Received is $5 Investor is writing a put:

Q: You are bearish on Telecom and decide to sell short 100 shares at the current market price of $50…

A: The question is based on the concept of margin calculation in stock trade.

Q: Suppose that you believe the fundamental value of Wal-Grey stock is about to rise from $50 to $100…

A: The profit realized from simple stock investment is only restricted to the rise in stock price. In…

Q: You shorted a call option on Intuit stock with a strike price of $34. When you sold (wrote) the…

A: Strike Price of $34 Premium received is $6 Time to expiry is 3 months To Find: Payoff  profits

Q: You shorted a call option on Intuit stock with a strike price of $34. When you sold (wrote) the…

A:

Q: The current price of a stock paying no income is 30. Assume the annually compounded zero rate will…

A: A legal agreement between two parties through which they agreed to sell or buy an asset at a…

Q: ABC Co. has a large amount of variable rate financing due in one year. The management is concerned…

A: An option gives the right to its buyer to buy a specific security at a future date at a price fixed…

Q: The stock of the Madison Travel Co. is selling for $28 a share. You put in a limit buy or- der at…

A: Given information: Price of share : $28 Limit : $24 Decline in price to $20 and increase to $36

Q: An investor with $2,000 to invest feels that a stock price will increase over the next 2 months. The…

A: An option buyer buys the right to buy/sell at a predefined date and price, in case of a call and put…

Q: Suppose an investor buys 300 stocks for 3 months, the stock price is 10 yuan, and the annual…

A: Given: Spot Price = 10 yuan Interest rate (r)= 5% Time (t) = 3 months Forward price = Spot price *e…

Q: You are bullish on Telecom stock. The current market price is $80 per share, and you have $12,000 of…

A: Given Current Market price =$80 Own money =$12000 Borrowed fund =$12000 Total initial investment…

Q: You own a put option on Ford stock with a strike price of $9. When you bought the put, its cost to…

A: Put Option: A put option gives the holder the right, but not an obligation to sell the underlying…

Q: Rebecca is interested in purchasing a European call on a hot new stock, Up, Inc. The call has a…

A: Options give the buyer the right to exercise the option but not the obligation to execute the…

Q: You own $75,000 worth of stock, and you are worried the price may fall by year-end in 6 months. You…

A: Call option - It is a contingent claim derivative that derives its value from the underlying which…

Q: Rebecca is interested in purchasing an European call on a hot new stock, Up, Inc. The call has a…

A: a) Black - Scholes model: C=S×N(d1)−PV(K)×N(d2)d1=lnS/PV(K)σT+σT2 and d2=d1-σT

Q: You now face the choice of investing it in a U.S. Treasury bond that will return $633,000 at the end…

A: Calculate the value of investment by dividing the value of Treasury bond at the end of the year…

Q: You are bullish on Telecom stock. The current market price is $50 per share, and you have $5,000 of…

A: Margin call is received when our margin percent falls below maintenance margin

Q: An investor holds stock ABC that is currently trading at $60/share and has a bearish outlook about…

A: Stock option are very common ways to hedge against securities.There are two typos of call option and…

Q: As a finance manager in a company, you considering purchasing a call option on the stock of Crude…

A: An option is a financial instrument whose value is calculated on the basis of underlying securities.…