•Suppose that gold currently sells for $1,200 an ounce. If the risk-free interest rate is .1%...
•Suppose that gold currently sells for $1,200 an ounce. If the risk-free interest rate is .1% per month, a six-month maturity futures contract should have a futures price of
•
•
•If the contract has a 12-month maturity, what is the price of the futures?
Homework Answers
Compute the price of the futures using the equation as shown below:
Future price = Spot price * ( 1 + Interest rate ) Period
= $1,200 * ( 1 + .1% ) 6
=$1,207.218024
Hence, the price of the futures is $1,207.21804.
Compute the price of the futures if there is a 12-month matuirity using the equation as shown below:
Price of the futures = Spot price * ( 1 + Interest rate ) Period
= $1,200 * ( 1 + .1% ) 12
=$1,214.479465
Hence, the price of the future is $1,214.479465
Add Answer to:
•Suppose that gold currently sells for $1,200 an ounce. If the
risk-free interest rate is .1%...
The current spot price of gold is $1200 per ounce. The riskless interest rate is 1%...
The current spot price of gold is $1200 per ounce. The riskless interest rate is 1% per month. For simplicity, assume there are no storage/security costs of gold. a) If you need to buy the gold in 8 months’ time, which position (long or short) will you take in the futures market to hedge the price risk of the gold? b) What is the arbitrage-free futures price for the delivery of gold in 8 months’ time? c) If you see...
A) The spot price of the British pound is currently $2.00. If the risk-free interest rate...
A) The spot price of the British pound is currently $2.00. If the risk-free interest rate on 1-year Government bonds is 4% in the United States and 6% in the United Kingdom, what must be the forward price of the pound for delivery 1 year from now? B) Assume that the spot price of gold is $1,500 per troy ounce, the risk-free interest rate is 2%, and storage and insurance costs are zero. 1) What should be the forward price...
] Question 4 (10 marks) Suppose the spot price of gold is $1,500 per troy ounce...
]
Question 4 (10 marks) Suppose the spot price of gold is $1,500 per troy ounce today. The futures price of gold for delivery in 1 year is $1,530 per troy ounce. Assume that the one-year gold futures contract is correctly priced and there are no storage and insurance costs. Also assume that the risk-free rate is compounded annually and you can borrow and lend money at the risk-free rate. a). What is the theoretical parity price of a two-year...
a. If the spot price of gold is $980 per troy ounce, the risk-free interest rate...
a. If the spot price of gold is $980 per troy ounce, the risk-free interest rate is 6%, and storage and insurance costs are zero, what should be the forward price of gold for delivery in one year? (Round your answer to 2 decimal places.) Forward price b. Calculate risk-free arbitrage profits if the forward price is $1,080. (Round your final answers to nearest whole dollar amount.) Profit L
1. Consider the futures contract to buy/sell December gold for $500 per ounce on the New...
1. Consider the futures contract to buy/sell December gold for $500 per ounce on the New York Commodity Exchange (CMX). The contract size is 100 ounces. The initial margin is S3,000, and the maintenance margin is $1,500. 1.a. Suppose that you enter into a long futures contract to buy December for $500 per ounce on the CMX What change in the futures price will lead to a margin call? If you enter a short futures contract, what futures price will...
A stock index currently stands at 500. The risk-free interest rate is 5 percent per annum...
A stock index currently stands at 500. The risk-free interest rate is 5 percent per annum (with continuous compounding) and the dividend yield is 3 percent per annum. What should the futures price for a 3-month contract be?
Question 4 (10 marks) Suppose the spot price of gold is $1,500 per troy ounce today....
Question 4 (10 marks) Suppose the spot price of gold is $1,500 per troy ounce today. The futures price of gold for delivery in 1 year is $1,530 per troy ounce. Assume that the one-year gold futures contract is correctly priced and there are no storage and insurance costs. Also assume that the risk-free rate is compounded annually and you can borrow and lend money at the risk-free rate. Part c) is not related to Parts a) – b). c)....
50.The oil price is currently $95 per barrel. The risk-free interest rate is 3% per annum,...
50.The oil price is currently $95 per barrel. The risk-free interest rate is 3% per annum, and the convenience yield of oil is 4% per annum. Consider an oil futures contract with a maturity of 6 months. Assuming the 6 months storage cost is equal to $1.50 per barrel, the no-arbitrage futures price is closest to: (a) 95.02 (b) 95.55 (c) 96.02 (d)96.55
4. Sun Board of Trade offers futures contract on Nyakato, Inc. Assume risk free interest rate...
4. Sun Board of Trade offers futures contract on Nyakato, Inc. Assume risk free interest rate is 0.25% per month and Nakato stock sells for $450 per share (a) Find the predicted futures price (on Nyakato) for delivery in 3 months. (5) (b) If the futures price on Nyakato stock in the market is $455.00, is the spot-futures parity relationship violated? If yes, show the strategy and the cash flows at time 0 and at time T (maturity) that can...
On January 21, gold is selling for $1387.25 per ounce in the spot market while the...
On January 21, gold is selling for $1387.25 per ounce in the spot market while the futures price for 3-month (90 day) April gold is $1402.50 per ounce on a 100 ounce contract. If the risk-free rate is 2.25%, determine what profit an investor will realize if he/she uses arbitrage (cash-and-carry or reverse cash-and-carry) to exploit the situation. (Assume the investor uses 2 gold futures contracts, and that no carrying costs are involved for storage or insurance.) Show all work....
]
Question 4 (10 marks) Suppose the spot price of gold is $1,500 per troy ounce today. The futures price of gold for delivery in 1 year is $1,530 per troy ounce. Assume that the one-year gold futures contract is correctly priced and there are no storage and insurance costs. Also assume that the risk-free rate is compounded annually and you can borrow and lend money at the risk-free rate. a). What is the theoretical parity price of a two-year...
a. If the spot price of gold is $980 per troy ounce, the risk-free interest rate is 6%, and storage and insurance costs are zero, what should be the forward price of gold for delivery in one year? (Round your answer to 2 decimal places.) Forward price b. Calculate risk-free arbitrage profits if the forward price is $1,080. (Round your final answers to nearest whole dollar amount.) Profit L
1. Consider the futures contract to buy/sell December gold for $500 per ounce on the New York Commodity Exchange (CMX). The contract size is 100 ounces. The initial margin is S3,000, and the maintenance margin is $1,500. 1.a. Suppose that you enter into a long futures contract to buy December for $500 per ounce on the CMX What change in the futures price will lead to a margin call? If you enter a short futures contract, what futures price will...
Question 4 (10 marks) Suppose the spot price of gold is $1,500 per troy ounce today. The futures price of gold for delivery in 1 year is $1,530 per troy ounce. Assume that the one-year gold futures contract is correctly priced and there are no storage and insurance costs. Also assume that the risk-free rate is compounded annually and you can borrow and lend money at the risk-free rate. Part c) is not related to Parts a) – b). c)....
50.The oil price is currently $95 per barrel. The risk-free interest rate is 3% per annum, and the convenience yield of oil is 4% per annum. Consider an oil futures contract with a maturity of 6 months. Assuming the 6 months storage cost is equal to $1.50 per barrel, the no-arbitrage futures price is closest to: (a) 95.02 (b) 95.55 (c) 96.02 (d)96.55
4. Sun Board of Trade offers futures contract on Nyakato, Inc. Assume risk free interest rate is 0.25% per month and Nakato stock sells for $450 per share (a) Find the predicted futures price (on Nyakato) for delivery in 3 months. (5) (b) If the futures price on Nyakato stock in the market is $455.00, is the spot-futures parity relationship violated? If yes, show the strategy and the cash flows at time 0 and at time T (maturity) that can...
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 10 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 10 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 10 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 10 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 10 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 10 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 10 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 10 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 10 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 10 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 10 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 10 months ago