(A) To calculate: Theoritical future price in accordance with sport future partity Introduction: Future price refers to the price pertaining to which two parties transact the commodity at a predeteromed price at a specific date in the future. It represents the price of commodity or stock on future contract in comparison to the current or spot price.

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Answer 1

Question

Chapter 21, Problem 6PS

Summary Introduction

(A)

To calculate:

Theoritical future price in accordance with sport future partity

Introduction:

Future price refers to the price pertaining to which two parties transact the commodity at a predeteromed price at a specific date in the future. It represents the price of commodity or stock on future contract in comparison to the current or spot price.

Summary Introduction

(B)

To determine:

The strategy that can be taken into consideration by investor to ascertain benefit out of the mispricing in future, if any

Introduction:

The future contract refers to the financial contract which is standardized in nature and is made between two parties wherein one party provide consent to sell or purchase the commodity at a particular date in the future and at a particular price to the other party which provide consent to purchase or sell the same. In the futures contract the physical delivery of the commodity does not take place.

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Consider two put options on the same stock with the same time to maturity. The strike price of Put A is less than the strike price of Put B. Which of the following is true? O It is possible for Put A to be in the money and Put B to be out of the money. O It is possible for Put A to be out of the money and Put B to be in the money. One of the options must be in the money. All of the other answers are correct.

Can you please help with the question in the picture attached? The answer should be only one and I’m quite confused. Thank you!

Both call and put options are affected by the following five factors: the exercise price, the underlying stock price, the time to expiration, the stock’s standard deviation, and the risk-free rate. However, the direction of the effects on call and put options could be different. Use the following table to identify whether each statement describes put options or call options. Statement Put Option Call Option 1. When the exercise price increases, option prices increase. 2. An option is more valuable the longer the maturity. 3. The effect of the time to maturity on the option prices is indeterminate. 4. As the risk-free rate increases, the value of the option increases.

Answer 2

Question

Chapter 21, Problem 6PS

Summary Introduction

(A)

To calculate:

Theoritical future price in accordance with sport future partity

Introduction:

Future price refers to the price pertaining to which two parties transact the commodity at a predeteromed price at a specific date in the future. It represents the price of commodity or stock on future contract in comparison to the current or spot price.

Summary Introduction

(B)

To determine:

The strategy that can be taken into consideration by investor to ascertain benefit out of the mispricing in future, if any

Introduction:

The future contract refers to the financial contract which is standardized in nature and is made between two parties wherein one party provide consent to sell or purchase the commodity at a particular date in the future and at a particular price to the other party which provide consent to purchase or sell the same. In the futures contract the physical delivery of the commodity does not take place.

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Answer 3

Question

Chapter 21, Problem 6PS

Summary Introduction

(A)

To calculate:

Theoritical future price in accordance with sport future partity

Introduction:

Future price refers to the price pertaining to which two parties transact the commodity at a predeteromed price at a specific date in the future. It represents the price of commodity or stock on future contract in comparison to the current or spot price.

Summary Introduction

(B)

To determine:

The strategy that can be taken into consideration by investor to ascertain benefit out of the mispricing in future, if any

Introduction:

The future contract refers to the financial contract which is standardized in nature and is made between two parties wherein one party provide consent to sell or purchase the commodity at a particular date in the future and at a particular price to the other party which provide consent to purchase or sell the same. In the futures contract the physical delivery of the commodity does not take place.

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Answer 4

Question

Chapter 21, Problem 6PS

Summary Introduction

(A)

To calculate:

Theoritical future price in accordance with sport future partity

Introduction:

Future price refers to the price pertaining to which two parties transact the commodity at a predeteromed price at a specific date in the future. It represents the price of commodity or stock on future contract in comparison to the current or spot price.

Summary Introduction

(B)

To determine:

The strategy that can be taken into consideration by investor to ascertain benefit out of the mispricing in future, if any

Introduction:

The future contract refers to the financial contract which is standardized in nature and is made between two parties wherein one party provide consent to sell or purchase the commodity at a particular date in the future and at a particular price to the other party which provide consent to purchase or sell the same. In the futures contract the physical delivery of the commodity does not take place.

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Answer 5

Chapter 21, Problem 6PS

Summary Introduction

(A)

To calculate:

Theoritical future price in accordance with sport future partity

Introduction:

Future price refers to the price pertaining to which two parties transact the commodity at a predeteromed price at a specific date in the future. It represents the price of commodity or stock on future contract in comparison to the current or spot price.

Summary Introduction

(B)

To determine:

The strategy that can be taken into consideration by investor to ascertain benefit out of the mispricing in future, if any

Introduction:

The future contract refers to the financial contract which is standardized in nature and is made between two parties wherein one party provide consent to sell or purchase the commodity at a particular date in the future and at a particular price to the other party which provide consent to purchase or sell the same. In the futures contract the physical delivery of the commodity does not take place.

Answer 6

Chapter 21, Problem 6PS

Summary Introduction

(A)

To calculate:

Theoritical future price in accordance with sport future partity

Introduction:

Future price refers to the price pertaining to which two parties transact the commodity at a predeteromed price at a specific date in the future. It represents the price of commodity or stock on future contract in comparison to the current or spot price.

Answer 7

Chapter 21, Problem 6PS

Summary Introduction

(A)

To calculate:

Theoritical future price in accordance with sport future partity

Introduction:

Future price refers to the price pertaining to which two parties transact the commodity at a predeteromed price at a specific date in the future. It represents the price of commodity or stock on future contract in comparison to the current or spot price.

Answer 8

Summary Introduction

(B)

To determine:

The strategy that can be taken into consideration by investor to ascertain benefit out of the mispricing in future, if any

Introduction:

The future contract refers to the financial contract which is standardized in nature and is made between two parties wherein one party provide consent to sell or purchase the commodity at a particular date in the future and at a particular price to the other party which provide consent to purchase or sell the same. In the futures contract the physical delivery of the commodity does not take place.

Answer 9

Summary Introduction

(B)

To determine:

The strategy that can be taken into consideration by investor to ascertain benefit out of the mispricing in future, if any

Introduction:

The future contract refers to the financial contract which is standardized in nature and is made between two parties wherein one party provide consent to sell or purchase the commodity at a particular date in the future and at a particular price to the other party which provide consent to purchase or sell the same. In the futures contract the physical delivery of the commodity does not take place.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 21 - Prob. 1PS Ch. 21 - Prob. 2PS Ch. 21 - Prob. 3PS Ch. 21 - Prob. 4PS Ch. 21 - Prob. 5PS Ch. 21 - Prob. 6PS Ch. 21 - Prob. 7PS Ch. 21 - Prob. 8PS Ch. 21 - Prob. 9PS Ch. 21 - Prob. 10PS

Solution Summary: The author calculates the theoritical future price in accordance with sport future partity. The investor can take advantage of the mispricing because the future contract of gold stands to be overpriced.

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