Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

problem 1: prepare brief notes on:

a) Speculator.
b) Arbitrager.
c) Hedgers.

problem 2: Describe various types of orders and different types of margin.

problem 3: A call option with a strike price of $50 costs $2. A put option with a strike price of $45 costs $3. Describe how strangle can be made from such two options. What the pattern of profits is from strangled?

problem 4: Assume that put options on a stock with strike prices $30 and $35 cost $4 and $7, correspondingly. How can the options be used to create:

a) A bull spread and
b) A bear spread

Construct a table which shows the profit and payoff for both spreads.

problem 5: A call with a strike price of $60 costs $6. A put with the same strike price and expiration date costs $4. Construct a table which shows the profit from a straddle. For what range of stock prices would the straddle lead to a loss?

problem 6: An investor enters into two long futures contracts on frozen orange juice. Each contract is for the delivery of 15,000 pounds. The present futures price is 160 cents per pound, the initial margin is $6,000 per contract and the maintenance margin is $4,500 per contract. What price change would lead to a margin call? Under what conditions $2,000 could be withdrawn from the margin account?

problem 7: Assume that the current spot price of gold is S = $350 per oz, the risk-free three-month rate of interest is 3% and there are no costs of holding gold. Determine the three-month forward price of gold?

problem 8: The forward price of wheat for delivery in three months is $3.90 per bushel, while the spot price is $3.60. The three-month interest rate in continuously compounded terms is 8% per annum. Is there an arbitrage opportunity in this market if wheat might be stored costless?

problem 9: Assume that the current price of gold is $365 per oz and that gold might be stored costless. Also assume that the term structure is ?at with a continuously compounded rate of interest of 6% for all maturities.

a) Compute the forward price of gold for delivery in three months.
b) Now assume that it costs $1 per oz per month to store gold (payable monthly in advance). Determine the new forward price?
c) Suppose storage costs are as in part (b). If the forward price is given to be $385 per oz, describe whether there is an arbitrage opportunity and how to exploit it.

problem 10: What is the price of a European call option on a non-dividend-paying stock when the stock price is $52, the strike price is $50, the risk-free interest rate is 12% per annum, the volatility is 30% per annum and the time to maturity is three months?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M92845

Have any Question? 


Related Questions in Basic Finance

There are 5 parts to this assignment -part a financial

There are 5 parts to this assignment - Part A: Financial analysis of a publicly-held company. Use Ford's latest consolidated and segment financial statements (form 10K) as filed with the SEC.  1. Calculate the current ra ...

1 what problems did the decline in housing prices that

1. What problems did the decline in housing prices that began in 2006 cause for the financial system? 2. What actions did the Federal Reserve and Treasury take in dealing with the financial crisis? What is the moral haza ...

1 what is the only relevant decision for independent

1. What is the only relevant decision for independent projects if an unlimited capital budget exists? How does your response change if the projects are mutually exclusive? How does your response change if the firm faces ...

1 pick a hypothetical construct describe external stimuli

1. Pick a hypothetical construct. Describe external stimuli that influence the construct and external behaviors that are influenced by the construct. 2. What are the limitations of operational definitions? 3. What is mea ...

1 what are four primary reasons that behavioral researchers

1. What are four primary reasons that behavioral researchers use case studies? 2. What is a psychobiography? 3. Why are behavioral scientists reluctant to trust case studies as a means of testing hypotheses?

Temple-midland inc is issuing a 1000 par value bond that

Temple-Midland, Inc. is issuing a $1000 par value bond that pays 8.5% annual interest and matures in 15 years. Investors are willing to pay $949 for the bond and Temple faces a tax rate of 20%. What is Temple's after-tax ...

Part -11interest income how can gross interest income rise

Part -1: 1) Interest Income. How can gross interest income rise while the net interest margin remains somewhat stable for a particular bank? 2) Bank Leverage. What does the assets/equity ratio of a bank indicate? 3) Loan ...

1 disadvantage of high liquidity what is a disadvantage of

1. Disadvantage of High Liquidity. What is a disadvantage of maintaining a very high level of liquidity? 2. Economic Impact on Liquidity Needs. Assume that your monthly expenses will not change over the next three years, ...

1 what is business culture does national culture affect

1. What is business culture? Does national culture affect business culture? Discuss some implications of national culture for business culture. 2. Discuss how national culture affects the business culture and the busines ...

Several stock valuation models were described in the

Several stock valuation models were described in the chapter, including zero-growth, constant growth, variable growth, free cash flow, book value, and P/E multiple models. Which of these do you believe would generate the ...

  • 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

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro