What is the required annual rate of return on the cocoa contract ? You plan to hold the contract for 3 months only, and take its delivery. At that time you expect the spot price of cocoa will be $900 per ton. What is the present value of this three-month deferred claim ? What should be the proper price of this contract ?
What is the required annual rate of return on the cocoa contract ? You plan to hold the contract for 3 months only, and take its delivery. At that time you expect the spot price of cocoa will be $900 per ton. What is the present value of this three-month deferred claim ? What should be the proper price of this contract ?
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
Related questions
Question
- If the risk-free rate is 4%, market risk premium is 6% and you are interested in a cocoa futures contract with beta of cocoa being -0.291,
- What is the required annual
rate of return on the cocoa contract ? - You plan to hold the contract for 3 months only, and take its delivery. At that time you expect the spot price of cocoa will be $900 per ton. What is the
present value of this three-month deferred claim ? - What should be the proper price of this contract ?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education