A currency speculator wants to speculate on the future movements of the E. The speculator expects the € to appreciate in the near future and decides to concentrate on the nearby contract. The broker requires a 2% Initial Margin (IM) and the Maintenance Margin (MM) is 75% of IM. Following € Futures quotes are currently available from the Chicago Mercantile Exchange (CME). Euro (CME)-€125,000; S/E High Open 1.2216 1.2276 Low Settle Change Open Interest 1.2175 1.2259 -0.0018 255,420 19,335 June Sept 1.2229 1.2288 1.2189 1.2269 -0.0018 Compute the Initial Margin (IM) amount in the Margin Account. CA $3,087.96 OB.$3,057.25 OC. $3,064.75 D.$3,054.00

A currency speculator wants to speculate on the future movements of the E. The speculator expects the € to appreciate in the near future and decides to concentrate on the nearby contract. The broker requires a 2% Initial Margin (IM) and the Maintenance Margin (MM) is 75% of IM. Following € Futures quotes are currently available from the Chicago Mercantile Exchange (CME). Euro (CME)-€125,000; S/E High Open 1.2216 1.2276 Low Settle Change Open Interest 1.2175 1.2259 -0.0018 255,420 19,335 June Sept 1.2229 1.2288 1.2189 1.2269 -0.0018 Compute the Initial Margin (IM) amount in the Margin Account. CA $3,087.96 OB.$3,057.25 OC. $3,064.75 D.$3,054.00

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Going long with Mexican peso futures contract. Soledad McArthur is the chief currency trader at the Magna Carta macro hedge fund. She decides on January 15 to go long by buying Mexican peso (MXN) March and June futures currently trading at US$0.11953 and US$0.11790.a. What does it mean to go long with an MXN futures contract? What is Soledad's implied exchange rate scenario?b. Assuming that the initial margin is set at 12.5 percent of the face value of the contract, what is the amount that Soledad has to deposit in the margin account (each contract has a face value of MXN 500,000)?c. If Soledad held the March futures to maturity and the spot exchange rate on that day was US$0.11878 = MXN 1, what would be the cash gain/loss incurred by Magna Carta? Assume that the margin account remains constant during the March futures holding period and that Magna Carta's opportunity cost of capital is 10 percent.d. On January 16, the inflation forecast released by Mexican authorities points to an…
Kk.233.
Suppose that Banco Bradesco in Brazil would like to enter a swap for USD100,000 three months from now for six months and the following quotes are available. Which of the following statements correctly describes the swap? Exchange Spot Rate BRL/USD 5.05/25 3-month 6-month 12/23 25/36 9-month 47/58 Banco Bradesco buys USD at 5.48 in 3 months' time; and buys BRL at 5.52 in 9 months' time Banco Bradesco buys USD at 5.17 in 3 months' time; and sells BRL at 5.83 in 9 months' time Banco Bradesco buy USD at 5.48 in 3 months' time; and sells BRL at 5.3 in 6 months' time Banco Bradesco buys USD spot at 5.05; and sells BRL at 5.61 at in 6 months' time
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Assume that the Risk Free Rate in Europe is 3% and in the US is 1%. if the current exchange rate of Euro to Dollar is 1.14 ( 1 Euro for 1.14 USD) What is going to be a fair futures price to deliver 1 Euro in 1 year? (mark the closest rounded answer please) 1.12 1.16 1.14 NONE OF THE ABOVE
(a) Suppose a trader takes a position on June 5th 2021, in one September 2021 EURO (EUR) future contract at USD1.3094/EUR. The trader holds the position until the last day of trading when the spot price is USD1.2939/EUR. This will be the final settlement price because of price convergence. The trader has EUR125,000 for this investment. (i) If the trader had a long position and he was a speculator, calculate his profit or loss for the position above. (ii) If the trader had a short position and he was a speculator, calculate his profit or loss for the position above. (iii) If the trader had a long position and he was a hedger, calculate his profit or loss for the position above. (iv) If the trader had a short position and he was a hedger, calculate his profit or loss for the position above. (b) Discuss factors that you would consider in evaluating the political risk associated before making FDI in a foreign country.
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Assume that you are running an Australia based company which has an account payable of EUR 125,000 due in three months. You decide to hedge out the associated foreign exchange risk using futures contracts. A futures contract of EUR125,000 is selling at A$1.5410 per euro. Suppose the next three days’ settlement prices are A$1.5399, A$1.5480, and A$1.5410. The initial margin of your performance bond account is $2,000 and maintenance margin is $1,500. What is your margin account balance at the end of the first day and what is the balance of this account at the end of the third day?
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