[Solved] Assignment 219111

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Suppose that on October 24 you Sell 7 March gold futures contracts for $285 per ounce.At 11:00 am on October 25 you buy 5 March contracts for $276.5 ounce. At the close oftrading on October 25, gold futures settle for $270.5 ounce. If the contract size is 100ounces and the initial margin equals 2850, how much do you gain or lose as of the close?Selected Answer:Correct Answer:Question 24 out of 4 pointsCorrectThe interest rate in Great Britain is 8.5 percent per year and the interest rate in the USA is9.5 percent. If the spot exchange rate is 1.15 dollars per pound, what is the price of a 22month forward contract to buy the British pound?Selected Answer:Question 30 out of 4 pointsIncorrectMogul oil refinery is planning to buy 9000 barrels of oil in 9 months. Suppose Mogulhedges the risk by buying futures on 6300.0 barrels of oil. The current oil futures price is$24.0 dollars per barrel. If in 9 months the spot price of oil is $23.0 and the futures price is$23.9 per barrel, what is Mogul’s effective cost per barrel?Question 44 out of 4 pointsCorrectAn investor enters into a short oil futures contract when the futures price is $15.25 perbarrel. The contract size if 100 barrels of oil. How much does the investor gain or lose ifthe oil price at the end of the contract equals $17.0Question 54 out of 4 pointsCorrectSuppose that a September put option with a strike price of $140 costs $5. 5. Under whatcircumstances will the seller (or writer) of the option earn a positive or zero profit? Let Sequal the price of the underlying.Selected Answer:S > 134.5Question 64 out of 4 pointsCorrectSuppose you enter into a long position to buy March Gold for $310 per ounce. Thecontract size is 100 ounces, the initial margin is $3100 and the maintenance margin is$1240. At what price will you receive a margin call?Question 74 out of 4 pointsCorrectSuppose you enter into a 6.0 month forward contract on one ounce of silver when the spotprice of silver is $7.3 per ounce and the risk-free interest rate is 9.75 percent continuouslycompounded. What is the forward price?Selected Answer:Question 84 out of 4 pointsCorrectAn investor enters into a long oil futures contract when the futures price is $16.75 perbarrel. The contract size if 100 barrels of oil. How much does the investor gain or lose ifthe oil price at the end of the contract equals $14. 75?Question 90 out of 4 pointsIncorrectWhich of the following statements is true in a market in which no arbitrageopportunities are available?I. A long forward for delivery in one year at $100 is worth more than along call optionstruck at $100 that expires in one year.II. A short forward which makes delivery in one year at $100 is worthmore than a longput option struck at $100 that expires in one year.III. A short forward which makes delivery in one year at $100 is worthmore than a shortcall option struck at $100 that expires in one yearIV. A long forward for delivery in one year at $100 is worth more than ashort put optionstruck at $100 that expires in one yearQuestion 104 out of 4 pointsCorrectSuppose that on October 24 you buy 7 March gold futures contracts for $325 per ounce.At 11:00 am on October 25 you buy 4 more contracts for $330.5 ounce. At the close oftrading on October 25, gold futures settle for $338.0 ounce. If the contract size is 100ounces and the initial margin equals 3250, how much do you gain or lose as of the close?Question 114 out of 4 pointsCorrectThe S&P 500 index has a dividend yield of 7.0 percent. Suppose you enter into a 11.0month forward contract to buy S&P 500 index . The current value of the index equals$1166.0 and the risk-free interest rate is 8.5 percent continuously compounded. What isthe forward price?Selected Answer:Question 124 out of 4 pointsCorrectGenerous Dynamics maintains an inventory of 15000 ounces of gold. The company isinterested in protecting the inventory against daily price changes. The correlation of thedaily change in the spot and futures price is . 55, the standard deviation of the daily spotprice change is 20 percent, and the standard deviation of the daily change in the futuresprice is 37 percent. Futures contract size is 1000 ounces. How many contracts should GDbuy or sell to hedge its inventory?Question 134 out of 4 pointsCorrectMogul oil company will sell 5000 barrels of oil in 4 months. Suppose Mogul hedges therisk by selling futures on 5000 barrels of oil. The current oil futures price is $18.1 dollarsper barrel. If in 4 months the spot price of oil is $16.5 and the futures price is $18.8 perbarrel, what is Mogul’s effective price of oil per barrel?Question 144 out of 4 pointsCorrectPixar stock is expected to pay a single $2.2 dividend in 5.0 months. Suppose you enterinto a 9.0 month forward contract to buy one share of Pixar stock when the share price is$41.6 per and the risk-free interest rate is 6.5 percent continuously compounded. What isthe forward price?Question 154 out of 4 pointsCorrectModern Portfolio Managers (MPM) hold a 4.5 million dollar portfolio of stocks with abeta of 1.1 measured with respect to the S&P 500 index. The current value of a futurescontract on the index is 1069. 1. The multiplier on the futures equals $250. If MPM wishesto hedge the systematic risk in its portfolio, how many contracts must it buy or sell?Selected Answer:Question 160 out of 4 pointsIncorrectGenerous Dynamics is planning on buying 12000 ounces of gold in six months. Thecorrelation of the six-month change in the spot and futures price is . 4. The standarddeviation of six-month change in spot and futures price are 11 percent and 39 percent,respectively. Futures contract size is 1000 ounces. How many contracts should GD buy orsell to hedge the future purchase?Selected Answer:Question 174 out of 4 pointsCorrectSuppose that a September put option with a strike price of $90 costs $14.0. Under whatcircumstances will the holder of the option earn a profit? Let S equal the price of theunderlying.Question 184 out of 4 pointsCorrectUnder which of the following cases is a short hedge appropriate?I. you anticipate buying the spot asset in the futureII.. you anticipate selling the spot asset in the futureIII. you currently own the spot asset and want to be protected against spot price changesIV. you anticipate buying a portfolio of stocks in the futureChoices:Question 190 out of 4 pointsIncorrectWhich of the following is true for all derivative securities we have considered in class?I. they are settled dailyII.. they are zero sum gamesIII. their future value is derived from an underlying asset or variable at future dateIV. a margin deposit is requiredV. they can be used for hedgingChoices:Question 204 out of 4 pointsCorrectWhich of the following statements concerning a minimum variance hedge (MVH) are true?I. the MVH is perfect if the hedge ratio equals oneII.. the MVH allows the hedger to lock in the futures priceIII. the optimal hedge ratio is less than one if the volatility of spot price changes is lessthan the volatility of futures price changes over the hedging period (?S< ?F)IV. the MVH chooses the hedge ratio that minimizes the variance of the hedging errorover the hedging periodChoices:Question 210 out of 4 pointsIncorrectWhich of the following is true about futures contracts?I. they trade in the over the counter marketII.. they are settled dailyIII. they are subject to default riskIV. a margin deposit is required for both long and short positionsV. the contract specifies a range of delivery dates (rather than a single date)Choices:Question 224 out of 4 pointsCorrectModern Portfolio Managers (MPM) hold a 8.0 million dollar portfolio of stocks with abeta of .65 measured with respect to the S&P 500 index. The current value of a futurescontract on the index is 1045. 2. The multiplier on the futures equals $250. If MPM wishesto increase its systematic risk in its portfolio to . 85, how many contracts must it buy orsell?Question 234 out of 4 pointsCorrectAn investor receives $1055.0 in 1.0 weeks for an initial investment of $1025.0. What isannual percentage return with continuous compounding?Selected Answer:Question 244 out of 4 pointsCorrectSuppose you enter into a short position to sell March Gold for $255 per ounce. Thecontract size is 100 ounces, the initial margin is $2550 and the maintenance margin is$1020. At what price will you receive a margin call?Question 254 out of 4 pointsCorrectSuppose that a September call option with a strike price of $60 costs $8. 5. Under whatcircumstances will the holder of the option earn a profit? Let S equal the price of the

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