rrently price £70 or decrease to £40. Assume the interest rate is 4% per time period. Find the no-arbitrage price of a European derivative on the share which has payoff £90 if the share price goes up and £110 if the share price goes down. State your answer to the nearest pence. Do not enter A

rrently price £70 or decrease to £40. Assume the interest rate is 4% per time period. Find the no-arbitrage price of a European derivative on the share which has payoff £90 if the share price goes up and £110 if the share price goes down. State your answer to the nearest pence. Do not enter A

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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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
A derivative trader sells a put option with a strike price of $40 for $5. What is the trader's maximum gain and maximum loss? max gain: $5 and max loss: $35 max gain: $35 and max loss: $5 max gain: $0 and max loss: $5 max gain: $40 and max loss: $0
You are thinking about entering into a 3 year plain vanilla swap with annual payments and a notional principal of $5,000,000. If you plan to pay the fixed rate on the swap what would you expect to pay if annual interest rates are listed below per annum with continuous compounding? Year Rate 1 3.00% 2 3.50% 3 4.50% A) $53,221.46 B) $150,000.00 C) $183,333.33 D) $227,411.44 E) $372,407.89 The answer is D. Show all work to reach D, no Excel.
Vijay
28. Consider a bank dealer who faces the following spot rates and interest rates. What should he set his 1- year forward ask price at? Bid So(S/E) S1.42 = €1.00 F360(S/E) A. $1.4324/€ B. $1.4358/€ C. $1.4662/€ D. $1.4676/€ Ask $1.45 = €1.00 Borrowing 4.25% APR is je 3.10% APR Lending 4% APR 3% APR
Suppose that, in each period, the cost of a security either goes up by a factor of 2 or goes down by a factor of 1/2 (i.e.,u= 2, d=1/2). If the initial price of the security is 100, determine the no-arbitrage cost of a call option to purchasse the security at the end of two periods for a price of 150. My main question is what should the no-arbitrage price of the call be? Can I have complete detail and formula please.
am. 116.
i sold a call option with an exercise price of $1.20/euro. the premium was $0.02/euro. what is my profit or loss if the exchange rate is $1.205/euro?
Do not use chatgpt .
Counterparty A can borrow from the floating rate market at LIBOR + 0.5% and Counterparty B can borrow from the Eurobond market at 7%. If Counterparty A pays 7.35% into the swap and Counterparty B pays the LIBOR rate plus 0.5% into the swap, then the overall cost to borrow by Counterparty B is: a. 7.85% b. LIBOR + 0.5% С. 7% d. LIBOR + 7.5% е. 7.35%
Q2) Suppose the current one-year euro swap rate y0[0, 1] is 1.74%, and the two-yearand three-year swap rates are 2.24% and 2.55% respectively. Euro swap rates are quotedwith annual payments and 30/360 daycount (thus α = 1). A hedge fund(HF) executes the following two trades with a dealer:1(1) The HF pays fixed and receives floating on e100 million notional of a one-year swap atthe forward swap rate.(2) The HF receives fixed and pays floating on e100 million notional of a three-year swapat the forward swap rate.Assume bid-offer costs are negligible.a) After one year, what net cashflow has the dealer paid to (or received from) the HF?b) Suppose after one year, one-year and two-year euro swap rates are unchanged. What isthe current value of the remaining part of the HF trade?c) Suppose after one year, the one-year euro swap rate is unchanged but the two-year euroswap rate is now Y%. What value of Y gives a total zero profit on the trade (at T = 1)?d) Do you like the trades the HF…
European put and call options both have an exercise price of GH¢50 that expires in 120 days.The underlying asset is priced at GH¢52 and makes no cash payments during the life of theoption. The risk-free rate is 4.5%. Find the price of the call option.

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