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Latrobe Uni 2010 Frm Assignment 1

961 words - 4 pages

It is stipulated in the contract that there is a margin call if $1,000 is lost. As a result, when the price of the futures rises from 450 cents to 470 cents per bushel(20cents multiply 5000=&1000). $1,500 can be withdrawn if the futures price falls by 30 cents from 450 to 420 cents per bushel. Divides two kinds of situations:

First, when price rises, the margin call is set. When
M0-Q×(F1-F0) ≤M or::
F1-F0 ≥(M0-M)/Q
F1-F0 ≥ (3000-2000)/5000=$0.2=20cents

Second, the company could withdraw W when
M0-Q×(F1-F0)-W ≥M.
F1-F0≤-W/Q
F1-F0≤-1500/5000=$0.3=-30cents

∴1500 can be withdrawn when the futures price falls by 30 cents to 420 cents per bushel.

4.25.
a).zero rate for ...view middle of the document...

058 =3.742 d=e-2×0.058 =0.89
c= (100-100×0.89) ×2/3.742=5.8792
The 6-month, 12-month, 18-month and 24-month par yields for bonds that provide semiannual coupon payments are 4.081, 5.18, 5.5 and 5.8792.
d). the price of a 2-year bond providing a semiannual coupon of 7% per annual:
3.5e-0.5×0.0404 +3.5e-0.0513 +3.5e-1.5×0.0544 +103.5e-2×0.058 =102.5
The yield of this bond:
3.5e-0.5y +3.5e-y +3.5e-1.5y +103.5e-2y =102.5, y=5.58%
The yield of this bond is 5.58%

5.23.a). In this question, investor take a short position in forward contract, therefore the initial value of the forward contract is 0.
Present value of dividends is: I=1×e-0.08×2/12 +1×e-0.08×5/12 =$1.954, S=$50
Forward price F=(S-I) e0.08×6/12 = (50-1.954) e0.08×6/12 =$50.01
b). present value of dividend is: I=1×e-0.08×2/12 =$0.987
Forward price F=(S-I) e0.08×3/12 = (48-0.987) e0.08×3/12 =$47.96
The value of the short position in the forward contract is:
f= (K-F) e-0.08×3/12 = (50.01-47.96) e-0.08×3/12 =$2.01

6.26

(1) The first day of delivery the bond has 15 years and 191 days to maturity. The value of bond assuming it lasts 15.5 years and all rates are 6% per annum with...

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