A portfolio manager desires to generate $10 million 100 days from now from a portfolio that is quite similar in composition to the S&P 100 index. She requests a quote on a short position in a 100-day forward contract based on the index with a notional amount of $I0 million and gets a quote of $25.2. If the index level at the settlement date is $35.7. calculate the amount the manager will payor receive to settle the contract
A ) A
B) A forward contract covering a $10 million face value of T-bills that will have 100 days to maturity at contract settlement is priced at 1.96 on a discount yield basil. Compute the dollar amount the long must pay at settlement for the T-bills.
C) Consider an FRA that: • Expires/settles in 30 days. • Is based on a notional principal amount of $1 million. • Is based on 9O-dayLIBOR. • Specifics a forward rate of 5%. Assume that the annual 9O-day LIBOR 30-days from now (at expiration) is 6%. Compute the cash settlement payment at expiration and identify which party makes the payment.
D) Consider a long position of five July wheat contract. each of which covers 5,000 bushels. Assume that thee contract price is $2.00 and that each contract requires an initial margin deposit of $150 and a maintenance margin of $100. The total initial margin required for the 5-contract trade is $750. The maintenance margin for the account is $500. Compute the margin balance for this position after a 2 cent decrease in price on Day 1, a l-cent increase in price on Day 2, and a l-cent decrease in price on Day 3.
E) BB can borrow in the United States for 9%, while AA has to pay 10% to borrow in the United States. AA can borrow in Australia for 7%, while BB has to pay 8% to borrow in Australia. BB will be doing business in Australia and needs AUD, while M will be doing business in the United States and needs USD. The exchange rate is 2AUD/USD. AA needs USD1.0 million and BB needs AUD2.0 million. They decide to borrow the funds locally and swap the borrowed funds. The swap period is for five yean. Calculate the cash flows for this swap.
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