FUND CORP FIN+CONNECTPLUS(LL) >CUSTOM<
11th Edition
ISBN: 9781259699481
Author: Ross
Publisher: MCG CUSTOM
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Textbook Question
Chapter 23, Problem 3QP
Futures Options Quotes [LO4] Refer to Table 23.2 in the text to answer this question. Suppose you purchase the June 2014 call option on corn futures with a strike price of $5.05. Assume you purchased the future at the last price. How much does your option cost per bushel of com? What is the total cost? Suppose the price of com futures is $4.96 per bushel at expiration of the option contract. What is your net profit or loss from this position? What if com futures prices are $5.24 per bushel at expiration?
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D6
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Chapter 23 Solutions
FUND CORP FIN+CONNECTPLUS(LL) >CUSTOM<
Ch. 23.1 - Prob. 23.1ACQCh. 23.1 - Prob. 23.1BCQCh. 23.2 - Prob. 23.2ACQCh. 23.2 - Prob. 23.2BCQCh. 23.3 - What is a forward contract? Describe the payoff...Ch. 23.3 - Prob. 23.3BCQCh. 23.4 - Prob. 23.4ACQCh. 23.4 - Prob. 23.4BCQCh. 23.5 - Prob. 23.5ACQCh. 23.5 - Prob. 23.5BCQ
Ch. 23.5 - Prob. 23.5CCQCh. 23.6 - What is a futures option?Ch. 23.6 - Prob. 23.6CCQCh. 23 - Keith is preparing a graph that compares the value...Ch. 23 - Prob. 23.3CTFCh. 23 - Prob. 23.6CTFCh. 23 - Prob. 1CRCTCh. 23 - Prob. 2CRCTCh. 23 - Prob. 3CRCTCh. 23 - Prob. 4CRCTCh. 23 - Prob. 5CRCTCh. 23 - Prob. 6CRCTCh. 23 - Options [LO4] Explain why a put option on a bond...Ch. 23 - Prob. 8CRCTCh. 23 - Prob. 9CRCTCh. 23 - Prob. 10CRCTCh. 23 - Prob. 11CRCTCh. 23 - Hedging Exchange Rate Risk [LO2] If a U.S. company...Ch. 23 - Hedging Strategies [LO1] For the following...Ch. 23 - Prob. 14CRCTCh. 23 - Prob. 15CRCTCh. 23 - Prob. 16CRCTCh. 23 - Prob. 1QPCh. 23 - Prob. 2QPCh. 23 - Futures Options Quotes [LO4] Refer to Table 23.2...Ch. 23 - Prob. 4QPCh. 23 - Futures Options Quotes [LO4] Refer to Table 23.2...Ch. 23 - Prob. 6QPCh. 23 - Prob. 7QPCh. 23 - Interest Rate Swaps [LO3] ABC Company and XYZ...Ch. 23 - Prob. 9QPCh. 23 - Prob. 10QPCh. 23 - Prob. 1MCh. 23 - Prob. 2MCh. 23 - Prob. 3MCh. 23 - Prob. 4MCh. 23 - Prob. 5MCh. 23 - Are there any possible risks Joi faces in using...
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- 6.Assume we have the following information: Spot price : 1146.00 Actual futures price : 1192.50 Theoretical futures price : 1160.00 Maturity : 3 months a. Is the futures fairly priced? Suppose an arbitrageur wish to take advantage of this opportunity. He has RM10,000,000.00 which he can fund at the current risk-free rate of 5%. b. What should he do? c. How many contracts should be shorted or bought? d. Assume that the arbitrageur maintains this position until contract expiry at which time futures and cash prices have converged to 1165. How much profit would he makes?arrow_forwardD6) You use the Black Scholes model to price a Call option on a stock with discrete dividends. The dividends will be given in months 1, 5, and 9, each 3 USD. The current value of the stock is 105 USD, the strike price is 90 USD, the continuously compounded annual risk-free rate is 0.05, the volatility is 0.08, the time to maturity is 12 months. Calculate the price of the option.arrow_forwardH5. What is the payoff to the trading strategy if the stock price at expiration is equal to $0 (i.e., the stock price is zero)? What is the payoff to the trading strategy if the stock price at expiration is equal to $50? What portfolio of calls (maturity T, any strike) and/or bonds (Zero Coupon Bond paying $1 at time T) will give you the desired payoff? Group of answer choices Sell $30 zero-coupon bonds, buy a call option with a strike price of $20, sell two call options with a strike of $40, and sell a call option with a strike price of $80 Buy $30 zero-coupon bonds, sell two call option with a strike price of $30, buy 2 call options with a strike of $40, and sell a call with a strike price of $80 It is not possible to construct this payoff with only calls and bonds Sell $50 zero-coupon bonds, buy two call with the strike price of $80, buy two calls with a strike price of $40, and sell a call with a strike of $20 Buy $30 zero-coupon bonds, sell a call option with a strike…arrow_forward
- Question 7 Current prices on Sterling options include the following. Sterling options £500,000 Strike price Calls March Puts March 9700 0.00 0.215 A company intends to use sterling options to hedge an exposure to the risk of a rise in the sterling interest rate above 3% before March. What should it do? A) Buy March puts B) Buy March calls C) Sell March puts D) Sell March callsarrow_forwardHELP WITH 4 PLEASE Consider a two period economy. You can buy stocks in period 0, and then sell them in period 1. You can also enter into futures contracts in period 0, which expire in period 1. Suppose a stock has a β of 0.5. The stock pays no dividends, and is trading at $100. The market has an expected return of 10%. The interest rate is 2%. Suppose the CAPM holds. What is the stock’s expected return? What is the expected price of the stock in period 1? Consider a futures contract on the stock, expiring at t = 1. What is the fair price of the futures contract, in t = 1 dollars? Suppose you take a long position in the futures contract in period 0 (so, you promise to pay money, in exchange for getting the stock in period 1). When the futures contract expires in period 1, you receive the stock and immediately sell it. What is the expected amount you will pay in money for the stock? What is the expected amount you get from selling the stock? Since buying single-stock futures appears…arrow_forward00 : 08 : 56 A futures price is currently 60 and its volatility is 30%. The risk free interest rate is 8% per annum. Use a two step binomial tree to calculate the value of a six month European call option on the futures with a strike price of 60? If the call were American, would it ever be worth exercising it early? Show workings and your binomial tree.arrow_forward
- Question 2. (a) Use the Black-Scholes formula to find the current price of a European call option on a stock paying no income with strike 60 and maturity 18 months from now. Assume the current stock price is 50, the lognormal volatility of the stock is σ = 20%, and the constant continuously compounded interest rate is r = 10%.arrow_forwardS3 Q12 Today is June 4, 2020. Stock X is selling at $150 per share. The stock has a dividend yield of 5% per year. There is a call option with an August 18, 2020 expiration date and an exercise price of $145, with an implied volatility of 20%. The annual risk free rate is 1%, compounded ontinuously. Shares and options can only be bought and sold in whole numbers. This problem requires the Normal Probability Table. One day later, on June 5, 2020, the share price goes up to $152. Calculate the delta and price for the 145-call option on June 5, 2020.arrow_forwardA Eurodollar futures price changes from 99.45 to 94.32. What is the gain or loss to an investor who is long 5 contracts? Choose the right answer: a. The investor makes gain – 128.25$ b. The investor makes loss – 641.25$ c. The investor makes loss – 195$ d. The investor makes gain – 195.25$ e. The investor makes loss – 128.25$arrow_forward
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