Q: (5.2.4) An investor deposits 50 in an investment account on January 1. The fol- lowing summarizes…
A: Time-weighted rate of return: Valuing the portfolio and calculating returns each time there is an…
Q: Finding the approximate market value of a long position in an FRA at a fixe
A: Forward Rate Agreement (FRA): It is over a counter contract among two parties where the rate of…
Q: You enter in a long position in a 6x12 FRA at a LIBOR rate of 3.00% and a nominal value of $10M. (a)…
A: Solution:-The scenario in question involves holding a long position in a Forward Rate Agreement…
Q: (Inspired by CT1 exam April '09) A company has agreed to rent a warehouse for 30 years. The rent…
A: To calculate the NPV of a 30-year warehouse rental contract with quarterly rent payments increasing…
Q: A contract requires payments of $4954.00 today, $4004.00 in 3 years, and S 2583.00 in 5 years. When…
A: TVM is the concept that considers money's interest-earning capacity, which makes money earned…
Q: A contract calls for a payment of P 1,200 at the beginning of each month for 12 months. At what rate…
A: Compound interest is interest calculated on the deposit or loan's original principal with any…
Q: Assume that Sonic Foundry Corporation has a contractual debt outstanding. Sonic has available two…
A: Present value is the current value of a future sum of money or stream of cash flows given a…
Q: An obligation of $8550.00 due in 2.5 years is to be settled by four equal payments due today, nine…
A: Step 1 An equated monthly installment (EMI) is a fixed monthly payment paid by a borrower to a…
Q: Assuming we have the following immediate interest rates in the market: 1M - 2.5%, 2M - 2.8%, 3M -…
A: Note: FRA 1v2 means forward rate for 1month bought after 1 month i.e. for the month between 1 and 2…
Q: You invest $6780 in a floating rate guaranteed investment certificate. For the first 30 months you…
A: A certificate of ownership or participation in a particular financial instrument or investment is…
Q: nents of $3762.00 today, $2666.00 in 2 years, and $5932.00 in 5 years. When can the contract be…
A: To solve this problem, we'll use the concept of the time value of money and the present value…
Q: Security A and security B both provide semi anual payment of 89 over 5Year. the annual rate of…
A: There are two types of annuity Deferred annuity Annuity due Deferred annuity means cash flow…
Q: On January 1, 20X1, Novak, Inc., enters into an interest rate swap and agrees to receive fixed and…
A: An agreement between two parties for financial exchange, of cash flows or liabilities from two…
Q: We have a three-month forward rate agreement (FRA) with underlying 90 day LIBOR starting on Jan 1,…
A: In valuation of FRA and in implementing FRA formula, following time line should be considered.
Q: . What to the nearest cent is the value of the long forward contract?
A: A financial agreement between two parties to purchase or sell an asset at a defined future date for…
Q: A payment stream consists of a payment of $1600 today, a payment of $2400 in 3 months, and a payment…
A: According to the money's time value theory, cash is worth more now than it will be later. A future…
Q: On January 1st, 2021, an investor enters into a 9-month forward contract on an asset. In February,…
A: With continuous compounded risk free rate (r), period (n) and current value (S0), the no arbitrage…
Q: A Firm buys an FRA on 90-day LIBOR expiring in 30 days with Notional principal of $20 million. The…
A: When LIBOR is 8%:Notional principal ×({Rate at settlement−FRA rate}×Days360)/(1+Rate at settlement…
Q: On January 1st, 2021, an investor enters into a 9-month forward contract on an asset. In February,…
A: With continuous compounded risk free rate (r), period (n) and current value (S0), the no arbitrage…
Q: On January 1, 20X1, Novak, Inc., enters into an interest rate swap and agrees to receive fixed and…
A: Part 1: The fair value of the swap agreement at December 31, 20X1:…
Q: 12. If a financial contract promises you to pay $110 next year and $121 the year after that, and if…
A: Year 0 cash flow = -$200 (i.e you pay $200 now)Year 1 cash flow = $110Year 2 cash flow = $121
Q: A credit union entered a lease contract valued at $8000. The contract provides for payments at the…
A: Lease value (L) = $8000 Number of payments (n) = 8 quarterly payments r = 4.7% per annum = 1.175%…
Q: Use the following spot rates to answer the following questions. Maturity Spot rate (%) 1 year 4.93%…
A: we are given a set of spot rates for different maturities and asked to determine if there is an…
Q: You invest $6780 in a floating rate guaranteed investment certificate. For the first 30 months you…
A: The principal amount of the note is $6780 The interest rate for the first 30 months is 4.9%…
Q: York Construction agreed to lease payments of $762.79 on construction equipment to be made at the…
A: A deferred annuity is a type of annuity contract where the annuity payments are deferred until a…
Q: a hypothetical financial instrument pays 10% annual interest permanently. It pays interest at the…
A: Here, Annual interest rate = 10% YTM = 12% monthly To Find: Part a. Macaulay duration =? Part b.…
Q: A contract calls for payments of $2800 at the end of every 6-month period for 8 years and additional…
A: Here,
Q: ST Trucking just signed a $3.8 million contract. The contract calls for a payment of $1.1 million…
A: the true value of the contract. Given Cash payment for the year,1 = $1.1M, Given Cash payment for…
Q: An obligation of 2500 falls due at the end of 7 years. If money is worth j12 = 10%, and an…
A: This is present value problem with monthly compounding interest rate.
Q: A contract calls for a payment of P 1,200 at the meginning of each month for 12 months. At what…
A: Annuity refers to the series of payments at regular intervals over a period of time. These reular…
Q: Determine the value of the following obligations, today, assuming a 4% simple interest rate: Use…
A: Present Value = Maturity Value / [ 1 + ( Discount rate * Period / 12 ) ] Maturity Value = Principal…
Assume that we entered into a one-year forward contract with price $300 today. Nine months later, the observed price of the stock is $350 and the interest rate is 8% per annum. The value of the existing forward contract expiring in three months will be closest to:
A.
49.05.
B.
55.72.
C.
–55.72.
D.
−49.05.
Step by step
Solved in 3 steps with 3 images
- Assume an investor bought a one-year forward contract with price F0(T) = 110. Six months later, at Time t = 0.5, the price of the stock is S0.5 = 115 and the interest rate is 4%. The value of the existing forward contract expiring in six months will be closest to: * 5. 7. -7.Assume an asset sells in the spot market for a price of $140, the risk-free rate is 5%, and a forward contract expires in ten months. What is the initial value of the contract and the correct forward price? $140 and $143.45 $0 and $145.82 $0 and $134.19A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 and the risk-free rate of interest is 10% per annum with continuous compounding. (a) What are the forward price and the initial value of the forward contract? (b) Six months later, the price of the stock is $45 and the risk-free interest rate is still 10%. What are the forward price and the value of the forward contract?
- A 6 month, short forward contract was negotiated 3 months ago when the spot price of the underlying asset was $400 and the risk-free rate of interest was 4% per year. The current spot price of the underlying is $450 and the 3- month risk-free rate (with continuous compounding) is 3% per year. The current value of the short forward contract is: O-44.97 O-43.97 O-51.99 O+48.00On March 2021, a 6-month long forward contract on a dividend-paying stock is agreed between two parties when the stock price is $30. And the risk-free rate of interest is 5% per annum with continuous compounding. The stock pays dividends of $5 on January each year .5 What is the corresponding forward price?12 . Consider a T-bill that will have a 125 days to maturity at the time of forward contract expiration. The forward in this T-Bill is quoted at a discount of 1.24%. At expiration, the amount the long will pay the short for delivery of T-bill worth $1m par is closest to: A. $995,694.44 B. $995,753.42 C. $987,600
- The current price of the underlying instrument is 1000 PLN. In a year (right after the expiry of the forward contract) this instrument will bring a dividend of PLN 70. In half a year the investor should bear the cost of storage of this instrument in the amount of PLN 50. If the current semi-annual interest rate is 4% (continuous interest rate) and the current annual interest rate is 5% (continuous interest rate), what should be the current forward price of this contract with time to maturity 1 year? O a. 1072.30 PLN O b. 1032.79 PLN O c. 1102.82 PLN O d. 1101.80 PLNBUG's stock price S is $108.67 today. It pays dividend of $0.5 after two months and $0.6 after five and a half months. If the continuously compounded interest rate is 1.1 percent per year, then the forward price of a 8-month forward contract on BUG is: [round to two decimal places]A contract calls for payments of $2800 at the end of every 6-month period for 8 years and additional payments of $6000 at the end of 5 years and $7500 at the end of 8 years. What is the present worth of the contract at 7.5% p.a. compounded continuously?
- A contract requires lease payments of $900 at the beginning of every month for 5 years. a. What is the present value of the contract if the lease rate is 3.50% compounded annually? $22,450.26 ☑ Round to the nearest cent b. What is the present value of the contract if the lease rate is 3.50% compounded monthly? $49,472.99 X Round to the nearest cent(Inspired by CT1 exam April '09) A company has agreed to rent a warehouse for 30 years. The rent will be paid quarterly in advance and will increase every three years at the rate of 3% per annum compound. The initial rent is set at £1,200,000 p.a. with the first payment due immediately. Calculate the NPV of the contract at a rate of interest of 5% p.a.Suppose that you, on 1st of January 2023, enter a long position in a 10-year forward contract on a non-dividend-paying stock. The stock price is $50 and the risk-free rate of interest is 5% per annum with yearly compounding (as per 1st of January 2023). a) What are the forward price and the initial value of the forward contract? Five years later, 1st of January 2028, the price of the stock is $60 and the risk-free interest is still 5%. b) On 1st of January 2028, what are the forward price and the value of the forward contract that you entered into on 1st of January 2023? Explain. c) Suppose that you on 1st of January 2028 enter a short position in a forward contract on the same underlying stock and with expiration date in 5 years. What is the value of your total position? (I.e. what is the total value of the long position in the forward contract in a) and your short position). What is the payoff of your total position at maturity? d) On 1st of January 2028, what is the value…