You enter into a futures arrangement to purchase 40 Alpacas. The futures price is $8400/Alpaca. You must deposit 60% of the purchase price into a margin account. The account pays 6% interest, compounded continuously. Over the next two days, the futures price of Alpacas fluctuates. After the first day, the price is $8430/Alpaca. After the second day, the price is $8420/Alpaca. You exit the arrangement after the second day. What is your profit if the risk-free interest rate is 9%, compounded continuously?

You enter into a futures arrangement to purchase 40 Alpacas. The futures price is $8400/Alpaca. You must deposit 60% of the purchase price into a margin account. The account pays 6% interest, compounded continuously. Over the next two days, the futures price of Alpacas fluctuates. After the first day, the price is $8430/Alpaca. After the second day, the price is $8420/Alpaca. You exit the arrangement after the second day. What is your profit if the risk-free interest rate is 9%, compounded continuously?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

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