(mark-to-market) You enter a long position in a € future contract with the size of €125,000today. The futures expire in 90 days. The interest rates are i$=6% and i€=3.3%. The currentspot rate is $1.38/€. Assume 360 days a year. If the spot rate is $1.43/€ the next day andinterest rates remain the same, your profit or loss for this day is $and two decimal places.)(Keep the sign

Futures Price today = Spot Rate x e (6% - 3.3%)* 90/360= 1.38 x e (0.06 - 0.033) x 90/360= 1.38 x e…

Answered: (mark-to-market) You enter a long…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

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Author:MOYER

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Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 4P

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(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 = 3.9% and i€ = 3.9%. The current spot rate is $1.38/€. Assume 360 days a year. If the spot rate is $1.43/€ the next day and interest rates remain the same, your profit or loss for this day is S _. (Keep the sign and two decimal places.)
(mark-to-market) You enter a short position in a € future contract with the size of €125,000 today. The futures expire in 90 days. The interest rates are i$=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.)
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
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
I got the answer, I want the work to see how to get the correct answer.
Consider a 6-month futures contract on a financial asset with dividend yield q=3.96% per year. Risk free rate is 10% per year. Current value of an asset is S0=$25. What should be the 6-month futures price on this asset, if there is no convenience yield and storage costs?
Currently the short term (1 to 12 month) borrowing rate is 3.50% per year and the lending rate over the same period is 0.50% per year. Which of the following implied repo rate per year for a six month futures contract will allow you an arbitrage opportunity? Assume no other transaction cost. O 3.25% O 0.25% O 3.00% O 2.75% O All of these 277
Suppose the September Eurodollar futures contract has a price of 96.4. You plan to borrow $50m for 3 months in September at LIBOR, and you intend to use the Eurodollar contract to hedge your borrowing rate. a. What rate can you secure? b. Will you be long or short the Eurodollar contract? c. How many contracts will you enter into? d. Assuming the true 3-month LIBOR is 1% in September, what is the settlement in dollars at expiration of the futures contract? (For purposes of this question, ignore daily marking-to-market on the futures contract.)
The futures contract for settlement in 4 months is trading at F0 = $6.35 and the cash market is trading at S1 = $6.42. The 4-month interest rate on a continuously compounded basis is 2 percent. What is the arbitrage trade that is available, the transactions and the arbitrage profit? Buy now at S1 with borrowed money and enter a short forward contract at Fo. At time T deliver the underlying, receive F0 and pay back the loan plus interest. Net profit is: $0.4200 Buy now at S1 with borrowed money and enter a short forward contract at Fo. At time T deliver the underlying, receive F0 and pay back the loan plus interest. Net profit is: $0.0280 Sell short S1 and invest proceeds at r and enter long a forward contract at Fo; at time T receive the underlying for F0, cover the short and also collect the principal plus from the bank. Net profit is: 0.1129
3. Suppose a financial asset, ABC, is the underlying asset for a futures contractwith settlement of 6 months from now. You know the following about this financial asset and futures contract in the cash market ABC is selling for $120; ABC pays $18 per year in two semiannual payments of $9, and the next semiannual payment is due exactly 6 months from now; and the current 6-month interest rate at which funds can be loaned or borrowed is 6%. a) What is the theoretical (or equilibrium ) futures price? b) Suppose that ABC pays an interest quarterly instead of semiannually, What would be the theoretical futures price for 3 months settlement? c) Suppose that the borrowing rate is 8% and the 6-month lending rate is 6%, What is the boundary for the theoretical futures price? SHOW YOUR SOLUTIONS, PLEASE DONT USE MS EXCEL
Suppose we wish to borrow $10 million for 91 days beginning next June, and that the quoted Eurodollar futures price is 93.23. What 3-month LIBOR rate is implied by this price? How much will be needed to repay the loan? Show work and discuss result.
What is the total net gain or loss on this transaction?

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