Magnoosium Oat bran Asset Biotech stock index Allen Wrench Company common stock 5-year Treasury note Westonian ruple Spot Price $2,820 per ton $0.46 per bushel $140.4 $58.20 $108.93 3.12 ruples = $1 The risk-free interest rate is 6% a year, and the term structure is flat. a. Calculate the six-month futures price for each case. Comments Net convenience yield = 6% per year Net convenience yield Dividend = 0 Cash dividend 8% coupon = 0.7% per month = $2.60 per year 14% interest rate in ruples c. Suppose the producer sells 1,000 tons of six-month magnoosium futures but after one-month magnoosium prices have fallen to $2,200. Will the producer have to undertake additional futures market trades to restore its hedged position? d. Does the biotech index futures price provide useful information about the expected future performance of biotech stocks? e. Suppose Allen Wrench stock falls suddenly by $10.50 per share. Investors are confident that the cash dividend will not be reduced. What happens to the futures price? f. Suppose interest rates suddenly fall to 4%. The term structure remains flat. Determine the six-month futures price on the five-year Treasury note. Complete this question by entering your answers in the tabs below. Req A Req C and D Req E Req F Calculate the six-month futures price for each case. Note: Do not round intermediate calculations. Round the Westonian ruple value to 3 decimal places and the other answers to 2 decimal places. Asset Magnoosium Oat bran Biotech stock index Allen Wrench Company common stock 5-year Treasury note Westonian ruple Future Price per ton per bushel < Req A ruples per $ Req C and D >
Magnoosium Oat bran Asset Biotech stock index Allen Wrench Company common stock 5-year Treasury note Westonian ruple Spot Price $2,820 per ton $0.46 per bushel $140.4 $58.20 $108.93 3.12 ruples = $1 The risk-free interest rate is 6% a year, and the term structure is flat. a. Calculate the six-month futures price for each case. Comments Net convenience yield = 6% per year Net convenience yield Dividend = 0 Cash dividend 8% coupon = 0.7% per month = $2.60 per year 14% interest rate in ruples c. Suppose the producer sells 1,000 tons of six-month magnoosium futures but after one-month magnoosium prices have fallen to $2,200. Will the producer have to undertake additional futures market trades to restore its hedged position? d. Does the biotech index futures price provide useful information about the expected future performance of biotech stocks? e. Suppose Allen Wrench stock falls suddenly by $10.50 per share. Investors are confident that the cash dividend will not be reduced. What happens to the futures price? f. Suppose interest rates suddenly fall to 4%. The term structure remains flat. Determine the six-month futures price on the five-year Treasury note. Complete this question by entering your answers in the tabs below. Req A Req C and D Req E Req F Calculate the six-month futures price for each case. Note: Do not round intermediate calculations. Round the Westonian ruple value to 3 decimal places and the other answers to 2 decimal places. Asset Magnoosium Oat bran Biotech stock index Allen Wrench Company common stock 5-year Treasury note Westonian ruple Future Price per ton per bushel < Req A ruples per $ Req C and D >
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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Transcribed Image Text:Magnoosium
Oat bran
Asset
Biotech stock index
Allen Wrench Company common stock
5-year Treasury note
Westonian ruple
Spot Price
$2,820 per ton
$0.46 per bushel
$140.4
$58.20
$108.93
3.12 ruples = $1
The risk-free interest rate is 6% a year, and the term structure is flat.
a. Calculate the six-month futures price for each case.
Comments
Net convenience yield = 6% per year
Net convenience yield
Dividend = 0
Cash dividend
8% coupon
=
0.7% per month
= $2.60 per year
14% interest rate in ruples
c. Suppose the producer sells 1,000 tons of six-month magnoosium futures but after one-month magnoosium prices have fallen to
$2,200. Will the producer have to undertake additional futures market trades to restore its hedged position?
d. Does the biotech index futures price provide useful information about the expected future performance of biotech stocks?
e. Suppose Allen Wrench stock falls suddenly by $10.50 per share. Investors are confident that the cash dividend will not be reduced.
What happens to the futures price?
f. Suppose interest rates suddenly fall to 4%. The term structure remains flat. Determine the six-month futures price on the five-year
Treasury note.
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Req A
Req C and D
Req E
Req F
Calculate the six-month futures price for each case.
Note: Do not round intermediate calculations. Round the Westonian ruple value to 3 decimal places and the other answers to
2 decimal places.
Asset
Magnoosium
Oat bran
Biotech stock index
Allen Wrench Company common stock
5-year Treasury note
Westonian ruple
Future Price
per ton
per bushel
< Req A
ruples per $
Req C and D >
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