MSF Derivatives Homework 1

Suppose you observe the following one-year interest rates, spot exchange rates and futures prices. Futures contracts are available on €10,000. How much risk-free arbitrage profit could you make on one contract at maturity from this mispricing? Exchange Rate Interest Rate APR So($/EL F380(S/E) $1.45 €1.00 is 4% $1.48 = €1.00 3% (Note: If you are unable to view the image shown above, you can download it: interestTable.PNG) O $159.22. O $153.10. $439.42. Onone of the options.

You Answered Correct Answer (mark-to-market) You enter a short position in a € future contract with the size of €125,000 today. The futures expire in 90 days. The interest rates are i$=5.9% and ic=6.1%. The current spot rate is $1.38/€. Assume 360 days a year. If the spot rate is $1.37/€ the next day and interest rates remain the same, your profit or loss for this day is $ ___. (Keep the sign and two decimal places.) 1,250 1,248.46 margin of error +/-0.05

This morning (Day 0) you take a short position in a pound futures contract that matures in 3 days (Day 3). The future price is $1.9750 today. The contract size is £62,500 and its initial performance bond and maintenance bond are $2,430 and $1,830, respectively. a. (b) Assuming that the daily settlement prices are indicated below, how would the daily change in settlement future prices affect your account? Show the daily gain/loss and account balance. Day 0 1 2 3 Settlement 1.9750 1.9700 1.9815 1.9907 Total Gain/Loss Account Balance b. During this period, did you receive a margin call? If you did, on what day? c. At the end of Day 3, how much in total did you make/lose on this futures contract?

KA. Please answer fast

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Q1-13 If a speculator observes that the current 3-month forward rate on Swiss francs is 20¢ = 1 franc, but he/she expects that the spot rate in 3 months will be 30¢ = 1 franc, then this speculator would now   a. buy dollars on the forward market. b. buy francs on the forward market. c. sell francs on the forward market. d. buy francs on the spot market and simultaneously sell francs on the 3-month forward market if the current spot rate is 25¢ = 1 franc.

Assume today’s settlement price on a CME EUR futures contract is $1.3144 per euro. You have a short position in one contract. EUR125,000 is the contract size of one EUR contract. Your performance bond account currently has a balance of $1,900. The next three days’ settlement prices are $1.3130, $1.3137, and $1.3053. Calculate the changes in the performance bond account from daily marking-to-market and the balance of the performance bond account after the third day. Required: Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

Assume today's settlement price on a CME EUR futures contract is $1.3154 per euro. You have a short position in one contract. EUR125,000 is the contract size of one EUR contract. Your performance bond account currently has a balance of $2,400. The next three days' settlement prices are $1.3140, $1.3147, $1.3063. Calculate the changes in the performance bond account from daily marking-to-market and the balance of the performance bond account after the third day. Required: Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Balance of the performance bond account

Give typing answer with explanation and conclusion

You Answered Correct Answer (mark-to-market) You enter a long position in a € future contract with the size of €125,000 today. The futures expire in 90 days. The interest rates are is=2.6% and ic=5.5%. The current spot rate is $1.38/€. Assume 360 days a year. If the spot rate is $1.36/€ the next day and interest rates remain the same, your profit or loss for this day is $ ___. (Keep the sign and two decimal places.) -2,500 -2,468.79 margin of error +/- 0.02

Q1-11   Suppose that a speculator notes that the current 3-month forward rate on the euro is $1.26 and the speculator expects that, in 3 months, the euro will have a value of $1.30. In this situation, the speculator would _______ euros on the forward market, and this activity ______ for the speculator.   a. buy / involves risk b. buy / involves no possible risk c. sell / involves risk d. sell / involves no possible risk

Yesterday, you entered into a futures contract to buy €62,500 at $1.50/€. Your initial margin was $3,750 (-0.04 x €62,500 × $1.50/€ -4 percent of the contract value in dollars). Your maintenance margin is $2,000 (meaning that your broker leaves you alone until your account balance falls to $2.000). At what settle price (use 4 decimal places) do you get a margin call? O $1.5280/€ O $1.4720/€ O none of the options $1.500/€

As a US exporter selling to Europe. You wish to hedge a 1,040,000 Euro to be received in 3 months with futures or forwards. Futures contract sizes for the Euro are 125,000E each.  How many dollars will you receive/pay for the goods if you hedge with futures, forwards, and not hedging? Also, rank them?                         Now                End Spot                 1.100-01 $/E   1.300-01 $/E Futures            1.120   $/E       1.315      $/E Forwards         1.130-31 $/E

Q20: Company ABC enters a 50 million notional principal interest rate swap. The swap requires ABC to pay a fixed rate and receive a floating rate equal to LIBOR The swap contract specifies that payments are made every twelve months with the floating payments determined by LIBOR at the begin of the twelve months. The period of the swap is four years. The following zero coupon curve prevails in the market (annual compounding). Time (years) 1 2 3 Rate 0.015 0.018 0.020 0.022 What is the swap rate? (the fixed rate that will make the interest rate swap zero NPY at the beginning) Select one: a 1.99% b 2.09% c1.89% d 2.19%

You are to receive €360,000 on May 16. Today’s spot rate is $1.10/€.  The forward rate is $1.12/€.  On May 16 the spot rate is $1.11/€.  Futures contracts are for €125,000 each. On May 16 you, 1) close out the forward contracts, and 2) receive the €360,000 and exchange them for dollars.        Q4. How much money did you make or lose on the contracts?    Q5. When you combine the gain or loss on the futures contracts with the dollars exchanged for the €360,000 what was the dollar/euro total exchange rate?   Q6.  Why was the amount you received per euro more than the $1.12 future contract hedge amount?

Assume that today the euro futures contracts with a September 15th delivery date are priced at $1.3680/€ . Suppose that you sold 15 contracts of the euro futures today. If, by September 15th the spot rate is $1.3260/€ , your total profit/loss on your position is (the euro futures contract size is €125,000).     $78,750 loss $78,750 gain €78,750 loss €5,250 loss None of the abov

You entered into a futures contract to buy €62,500 at $1.20/€ yesterday. Your initial margin was $4,200. Your maintenance margin is $2,500 (meaning that your broker leaves you alone until your account balance falls to $2,500). At what settle price will you get a margin call? $1.2750/€ $1.0272/€ $1.1728/€ O $1.5800/€

(mark-to-market) You enter a short position in a € future contract with the size of €125,000 today. The futures expire in 90 days. The interest rates are i$=5.9% and iç-6.1%. The current spot rate is $1.38/€. Assume 360 days a year. If the spot rate is $1.37% € the next day and interest rates remain the same, your profit or loss for this day is $___________ __.(Keep the sign and two decimal places.)

Yesterday, you entered into a futures contract to buy €62,500 at $1.50 per €. Your initial performance bond is $1,500 and your maintenance level is $500. At what settle price will you get a demand for additional funds to be posted? ANSWER D IS CORRECT BUT WHAT IS THE PROCEDURE BUT HOW DO I GET THERE?   a) $1.5160 per €.   b)$1.208 per €.   c)$1.1920 per €.   d)$1.4840 per €. Correct

Laura Cervantes. Laura Cervantes, the currency speculator we met in the chapter, sells eight June futures contracts for 500,000 pesos (Ps) at the closing price quoted in: a. What is the value of her position at maturity if the ending spot rate is $0.12003 = Ps1.00? b. What is the value of her position at maturity if the ending spot rate is $0.09809 = Ps1.00? c. What is the value of her position at maturity if the ending spot rate is $0.11002 = Ps1.00? (Round to the nearest cent. Use a minus sign if value is negative.) a. What is the value of her position at maturity if the ending spot rate is $0.12003 = Ps1.00? The value of Amber's position is $ b. What is the value of her position at maturity if the ending spot rate is $0.09809 = Ps1.00? The value of Amber's position is $ The value of Amber's position is $ (Round to the nearest cent. Use a minus sign if value is negative.) c. What is the value of her position at maturity if the ending spot rate is $0.11002 = Ps1.00? (Round to the…