The current price of a 3*6 Euribor FRA is 1.500% while the Euribor yield curve prevailing today is as follow: Maturity (Months) 3 6 Yield 1.049% 1.272% Is there any arbitrage opportunity? Illustrate the arbitrage operation assuming that the 3-month Euribor observed at maturity is a)1.550% and b) 1.430%

The current price of a 3*6 Euribor FRA is 1.500% while the Euribor yield curve prevailing today is as follow: Maturity (Months) 3 6 Yield 1.049% 1.272% Is there any arbitrage opportunity? Illustrate the arbitrage operation assuming that the 3-month Euribor observed at maturity is a)1.550% and b) 1.430%

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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Consider the following money market information being quoted: Which of the following statements is true? Particulars GBP Interest Rate THB Interest Rate Spot Rate 1-year Expected Spot Rate Bid Rate 6.100% 10.550% THB5.6601/GBP THB5.9037/GBP C. Ask Rate 6.125% 10.625% THB5.6622/GBP THB5.9961/GBP a. There is an arbitrage which can only be made by initially borrowing GBP and then investing in THB. b. More than one of the options in this question are correct. The THB is selling at a premium to the GBP in the future. O d. There is an arbitrage which can only be made by initially borrowing THB and then investing in GBP.
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
A3) Finance The implied volatilities for strike prices of 1.1 and 1.2 when the time to maturity is 3 months are 20% and 22%. The implied volatilities for strike prices of 1.1 and 1.2 when the time to maturity is 9 months are 17% and 20.2%. What is the implied volatility for the strike prices of 1.1 for a time to maturity of 6 months? Select one: a. 20.10% b. 8.50% c. 21.10% d. 19.40% e. 18.50%
A European call that will expire in one year is currently trading for $3. Assume the risk-free rate (based on continuous compounding) is 5%, the underlying stock price is $60 and the strike price is $55. a. Is there an arbitrage opportunity? b. Describe exactly what a trader should do to take advantage of the arbitrage opportunity assuming it exists. c. Determine the present value of the profit that the trader can earn assuming you identify an arbitrage opportunity. Use at least four decimal places for those questions that require a numerical answer.
M6
A gilt with a face value of £100 and 2 years to maturity pays a 6% annual coupon. It is quoted at a price of £99.09. What is its yield to maturity (YTM)? Present Value Table Present value of 1 i.e. (1 + r)–n Where r = discount rate n = number of periods until payment Periods Discount rate (r) Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%1 0.990 0.980 0.971 0.962 0.952 0.942 0.933 0.923 0.914 0.9052 0.980 0.961 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.8263 0.971 0.942 0.914 0.887 0.861 0.837 0.813 0.790 0.768 0.7464 0.961 0.924 0.888 0.853 0.819 0.786 0.754 0.723 0.693 0.6655 0.951 0.888 0.837 0.789 0.747 0.708 0.672 0.636 0.603 0.5736 0.942 0.853 0.789 0.735 0.681 0.630 0.582 0.537 0.495 0.4567 0.933…
The yield on a one-year Treasury security is 4.6900%, and the two-year Treasury security has a 6.3315% yield. Assuming that the pure expectations theory is correct, what is the market's estimate of the one-year Treasury rate one year from now? (Note: Do not round your intermediate calculations.) 6.799% O7.9988% O9.1186% O 10.1585% Recall that on a one-year Treasury security the yield is 4.6900% and 6.3315% on a two-year Treasury security. Suppose the one-year security does not have a maturity risk premium, but the two-year security does and it is 0.15%. What is the market's estimate of the one-year Treasury rate one year from now? (Note: Do not round your intermediate calculations.) O 7.6942% O 8.7714% O9.7716% O 6.5401% Suppose the yield on a two-year Treasury security is 5.83%, and the yield on a five-year Treasury security is 6.20%. Assuming that the pure expectations theory is correct, what is the market's estimate of the three-year Treasury rate two years from now? (Note: Do not…
a) If the dividend yield is 1.40% annualized, the interest rate is -0.10% annualized, and the index is trading at 28, 144 today, what is the expected price of a 6-month forward? 28, 144e(-0.001 -0.0140)*0.50 = 27,961.66 b ) The 6-month forward is currently quoted at 28,000. Using the information above and the grid below, show how you would arbitrage this index profitably. Be sure to indicate whether each transaction is long or short ( buy or sell) and to include (+) and (-) signs on your cash flows. Use 0 decimals (whole numbers only) in your answers. Transaction Time 0 cash flows Time t cash flows Totals:
Give typing answer with explanation and conclusion
Consider a 1-year semi-annually paid interest rate swap, the notional is £1,000,000, the swap rate is 3.0%, the floating rate is GM LIBOR + 1%. On the market, the 6M LIBOR spot and its 6-month maturity forward are 3.0% and 1.0%, respectively. Sketch the cash-flow diagram of the fixed-leg.
following questions: a. What is the mid-rate for each maturity? b. What is the annual forward premium for all maturities? (Click on the icon to import the table into a spreadsheet.) Period spot 1 month 2 months 3 months 6 months 12 months 24 months Period Bid Rate Spot 1.3267 1.3265 1.3263 1.3259 1.3250 1.3228 1.3179 a. What is the mid-rate for each maturity? Calculate the mid-rate for each maturity below: (Round to five decimal places.) Days Forward Ask Rate 0 1.3268 1.3266 1.3264 1.3262 1.3252 1.3233 1.3207 Bid Rate US$/€ 1.3267 Ask Rate US$/€ 1.3268 Mid-rate US$/€
The yield on a one-year Treasury security is 5.6100%, and the two-year Treasury security has a 6.7320% yield. Assuming that the pure expectations theory is correct, what is the market’s estimate of the one-year Treasury rate one year from now? (Note: Do not round your intermediate calculations.) a 9.9897% b 8.9671% c 7.8659% d 6.686%

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