a. Whether you should use a long or short forward contract to hedge the currency risk. Long position in forward contract O Short position in forward contract b. Calculate the no-arbitrage price at which you could enter into a forward contract that expires in 30 days. (Do not round intermediate calculations. Round your answer to 4 decimal places.) No-arbitrage price c. Move forward 10 days. The spot rate is $3.43. Interest rates are unchanged. Calculate the value of your forward position. (Do not round intermediate calculations. Round your answer to 4 decimal places.) Forward position

a. Whether you should use a long or short forward contract to hedge the currency risk. Long position in forward contract O Short position in forward contract b. Calculate the no-arbitrage price at which you could enter into a forward contract that expires in 30 days. (Do not round intermediate calculations. Round your answer to 4 decimal places.) No-arbitrage price c. Move forward 10 days. The spot rate is $3.43. Interest rates are unchanged. Calculate the value of your forward position. (Do not round intermediate calculations. Round your answer to 4 decimal places.) Forward position

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which statement is true about the difference between futures and forward contracts? 1. Futures contracts have a fixed price, while forward contracts have a price determined at the maturity. 2. Futures contracts are settled at the end of the maturity, while forward contracts are settled daily. 3. Futures contracts are traded on the exchange, while forward contracts are traded on CCP. 4. If there are significant price fluctuations before the maturity date, futures contracts can lead to more unfavorable results compared to forward contracts. 5. None of them.
You are a crude oil dealer. You intend to sell 50,000 barrels of crude oil in December. Each contract calls for delivery of 2,000 barrels of oil. Current futures price of one barrel of crude oil is $70. You believe that there are only four possible oil prices in December which are $50, $60, $70, and $80.i. Explain what action you would take to protect from changes in oil prices in December. Provide reasons for your action.ii. Calculate the total proceeds (sales proceeds plus loss or profit from futures contracts) for each of the possible price in December.
An international exporter who thinks the value of the dollar will increase and does not want to manage the risk On the Balance Sheet stock, would purchase: A. Cumulative Preferred Stock B. Forward Contract C. Participating Preferred Stock O D. A 3 Month US Treasury Bill
2-3 how does the repurchase agreement and implied repo rate play a role in the pricing of futures contracts?
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6. Futures contract are settled daily and usually closed out prior to maturity.
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