The bid price for spot gold is $ 1820/oz, the asked price for spot gold is $ 1822/oz and the yearly interest rate is 6%. The forward contract calls for the delivery of 100 oz. of gold in three months. The lender of gold will allow only 50% of the proceeds from a short sale. Also assume that the total transaction cost of buying or selling 100 oz. of gold, and trading one forward contract, is $1/oz. There is no carry return. The range of possible forward prices per ounce of gold that precludes arbitrage is then: O $1832.65 - $1850.33 O $1821.21-$1823.21 O $1928.20 - $1932.32 O $1846.30-$1848.30

The bid price for spot gold is $ 1820/oz, the asked price for spot gold is $ 1822/oz and the yearly interest rate is 6%. The forward contract calls for the delivery of 100 oz. of gold in three months. The lender of gold will allow only 50% of the proceeds from a short sale. Also assume that the total transaction cost of buying or selling 100 oz. of gold, and trading one forward contract, is $1/oz. There is no carry return. The range of possible forward prices per ounce of gold that precludes arbitrage is then: O $1832.65 - $1850.33 O $1821.21-$1823.21 O $1928.20 - $1932.32 O $1846.30-$1848.30

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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219 a. JONO has negotiated a put option contract for 250,000 ounces of gold at an exercise price of $290/oz. The seller of this put option charges an option premium of $20/oz, so that the total premium that UBSS pays is 5,000,000. Under the terms of the put option, JONO is entitled to sell the gold to the option writer at any time up to the maturity, which is in three months’ time. How does this strategy perform as a risk management technique, if three months’ time the price of the gold is $270/oz.? b.How does this strategy perform for JONO as a risk management technique, if three months’ time the price of the gold is $315/oz.?
None
You buy 6 call options with a contract size of AUD 30,000. They have a USD/AUD strike price of 0.57 and a premium of 7.86 (USD/AUD). You hold these options for 1 month and then sell them for 6.8 (USD/AUD). The brokerage fee on each contract is payable on both entry and exit and is USD 12.21. What is the net profit on this transaction in USD? O a. -190,946.52 Ob. -31,824.42 Oc. -190,800.00 O d. -190,873.26 Oe. -55,800.00 You buy 6 call options with a contract size of AUD 30,000. They have a USD/AUD strike price of 0.57 and a premium of 7.86 (USD/AUD). You hold these options for 1 month and then sell them for 6.8 (USD/AUD). The brokerage fee on each contract is payable on both entry and exit and is USD 12.21. What is the net profit on this transaction in USD? O a -190,946.52 Ob 31,824.42 O-190,800.00 Od 190,873.26 -55.800.00
Three months ago you short a forward contract on soya bean that expires today has a forward delivery price of$400 per Metric Ton. The current forward price is$420 . The three-month risk-free interest rate (with continuous compounding) is8% p.a. What is the value of the short forward contract? A) +$27.92 B) −$27.92 C) +$20.00 D) −$35.68
PT. Bro agreed to pay Bank Bos a fixed interest rate of 6% per annum with a contract fund of $ 10,000,000 and Bank Bos agreed to pay PT. Bro the annual LIBOR interest rate with the same fund contract. It is predicted that the first year's LIBOR interest rate is 4% and then 5%, 6%, 7% and 6.5%. Make cash flow from interest rate swaps and who will get and how much profit.
The spot rate of gold is $1,200 per ounce. Please plot the payoff of selling a call option on an ounce of gold with a $50 premium and the strike price equal to $1,200. (You can copy a screenshot from an excel or similar).
The price of gold is currently $1700 per ounce. The forward price for delivery in one year is $1800. An arbitrageur can borrow money at 5% per annum. What should the arbitrageur do? Assume that the cost of storing gold is zero and that gold provides no income.
A certain commodity can be bought in cash for $ 200,000.00. However, the agent allows to purchase the commodity in 9 equal payments, the first being due at the end of 10 year with an interest of 7.50% compounded continuously. a) Find the annual payments b) detemine the compound amount factor of the uniform payment series and the sinking fund factor.
The current price of silver is $70.7 per ounce. The storage cost is 4.9% per annum with continuous compounding. Assuming that interest rates are 8.4% per annum with continuous compounding for all maturities, calculate the futures price of silver for delivery in 23 months G
1) A gold miner expects to have 80, 000 ounces of silver gold production at end of 2023. It has concern about silver gold price may decline over the next several months. Silver price today is $23.5 per oz; the futures price for December 2023 delivery is $24.0 per ounce. Each silver contract is 5000 oz. silver. Question: 1) How many silver contacts it will need to sell to hedge the price thru year end 2023? 2) If at year end 2023, silver price declines to $23 per oz., calculate and see how the hedge works.
You have just purchased a six-month, $550,000 negotiable CD, which will pay a 8.5 percent annual interest rate. a. If the market rate on the CD rises to 9 percent, what is its current market value?b. If the market rate on the CD falls to 8.25 percent, what is its current market value?
Spot price for gold is $500. Forward contracts are available to buy or sell gold at $550 in one year. An arbitrageur can borrow or invest money at 5% per year. Assume that the cost of storing gold is zero and that gold provides no income. If the one year forward price for gold is $505 rather than $550, how to set up arbitrage positions? And how much is your profit?

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