Question cattle prices are currenlty 070pound and hog, Ask an Expert

Finance

Question: Cattle prices are currenlty $0.70/pound and hog prices are $0.60/pound. Expecing the price difference between cattle and hogs to continue to grow wider, a spread trader puts on a long June CME live Cattle/short June CME Lean Hog spread trade (one contract each). Three months later when the change in the spread differential reaches $0.15 per pound, she liquidates the position.

(1)When she initiated the spread trade, which contract did she believe would rise more? Which contract was over-priced?

(2) What is the initial cattle-hog spread?

(3) What profit does the spread trader make on the trade ($/pound)?

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92792665

Have any Question?Write your Review or question?

Related Questions in Basic Finance

A stock can be sold for 1425 the investment bank charges

A stock can be sold for $14.25. The investment bank charges $1.10 per share for creating and marketing the shares. If the last dividend was $.91 and the growth rate is 2.1%, what is the cost of new common stock financing ...

Suppose that a 2-year bond has a face value of 1000 and

Suppose that a 2-year bond has a face value of 1000 and pays semi-annual coupons of 50. If the price is 930, compute YTM and EAY.

Why should investors who identify positive-npv trades be

Why should investors who identify positive-NPV trades be skeptical about their findings if they don't inside information or a competitive advantage? What return should the average investor expect to receive?

Craigs cake company has an outstanding issue of 15-year

Craig's Cake Company has an outstanding issue of 15-year convertible bonds with a $1,000 par value. These bonds are convertible into 80 shares of common stock. They have a 13% annual coupon interest rate, whereas the int ...

One year ago you bought a put option on 125000 euros with

One year ago, you bought a put option on 125,000 euros with an expiration date of one year. You paid a premium on the put option of $.05 per unit. The exercise price was $1.36. Assume that one year ago, the spot rate of ...

Firstly a systematic risk is one that deals with a large

Firstly a systematic risk is one that deals with a large number of assets and can also be labeled as a market risk, on the other hand a non systematic risk is quite the opposite in that it deals with only a small number ...

Question - booker inc has identified an investment project

Question - Booker, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $1,000 2 1,230 3 1,450 4 2,190 If the discount rate is 9 percent, what is the future value of these cash flows ...

Supposenbspintels stock has an expected return of 220 and a

Suppose? Intel's stock has an expected return of 22.0% and a volatility of 23.0%?, while? Coca-Cola's has an expected return of 8.0% and volatility of 15.0%. If these two stocks were perfectly negatively correlated?(i.e. ...

You observe following exchange rate quotations 1 is equal

You observe following exchange rate quotations: $1 is equal to 6.4568 Chinese yuan 1 Japanese yen equal to 0.0616 Chinese yuan. How many U.S. dollars will you need to purchase 1 billion Japanese yen?

When figuring the benefit-cost ratio i know that i take the

When figuring the benefit-cost ratio, I know that I take the present value of cash inflows/ present value of cash outflows. Year 0 = (46,500) cash flow Year 1 = 12,200 cash flow Year 2 = 38,400 cash flow Year 3 = 11,300 ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert