PLEASE SHOW YOUR WORK. Silver currently trades for $99 per ounce. The cost to store sliver...

PLEASE SHOW YOUR WORK.

Silver currently trades for $99 per ounce. The cost to store sliver is 0.7% per year continuously compounded. The riskless rate of interest is 5.9% per year c.c. What is the fair value of a futures contract on silver maturing in 6 months?

Expert Solution

Future value of contract = (S0 + U) * e^rt

S0 = 99 per ounce

U = Storage cost = 99* 0.7 = 6.93

e = a mathematical constant having value of 2.7183

r = 0.5

r = 5.9% per year or 2.95% per semi annual

Let’s put all the values in the formula

Future value of contract = (99 + 6.93)* 0.027183^0.0295*1

= 105.93 * .899107

= 95.24

--------------------------------------------------------------------------------------------------------------------------

Feel free to comment if you need further assistance J

Pls rate this answer if you found it useful.

jeff jeffy answered 2 years ago

Again, suppose silver is currently selling at $4.23 per ounce in the spot market. Assume as...

Again, suppose silver is currently selling at $4.23 per ounce in the spot market. Assume as well that the current risk-free rate (implied repo rate) is 3.75% and that silver contracts involve 5000 ounces each. Also, now assume that carrying costs (storage and insurance) for silver are accessed at .31% (0.0031) per ounce price. a. Including carrying costs, what should the 6 month (180 days) silver futures contract be selling for according to the cost-of-carry model? b. If the 6...

The spot price of silver is $20 per ounce. The storage costs are $0.30 per ounce...

The spot price of silver is $20 per ounce. The storage costs are $0.30 per ounce per year payable quarterly in advance. Assuming that interest rates are 4% per annum for all maturities, calculate the futures price of silver for delivery in 12 months.

The spot price of silver is $15.25 per ounce. The storage costs are $0.32 per ounce...

The spot price of silver is $15.25 per ounce. The storage costs are $0.32 per ounce per year payable quarterly in advance. Assuming that interest rates are 8.5% per annum for all maturities with continuous compounding, calculate the futures price of silver for delivery in nine months

(a) Suppose that silver currently sells for $1,200 an ounce. If the risk-free rate is 1%...

(a) Suppose that silver currently sells for $1,200 an ounce. If the risk-free rate is 1% per year, what should be the price of a one-year maturity futures contract? (b) Suppose the price of one-year futures contract is $1,220 instead in the previous problem, please construct an arbitrage strategy so that investors can make riskless profits. (c) Suppose the price of one-year futures contract is $1,205 instead in the previous problem, please construct an arbitrage strategy so that investors can...

Please show work. Alibaba is currently selling for $58 per share. In one year the price...

Please show work. Alibaba is currently selling for $58 per share. In one year the price will either be 114 or 42. The risk free rate is 5%. What is the premium of a call option on Alibaba with a strike price of 68 and one year until maturity? $0.71 $6.50 $3.90 $11.50 You purchased 100 shares of Pfizer at $16 and at the same time you bought a six-month put with a strike of $15 for $1.00. What is...

6. The cost of the pouring brand of scotch is $0.58 per ounce, and the cost...

6. The cost of the pouring brand of scotch is $0.58 per ounce, and the cost of club soda is $0.04 per ounce. Determine the cost of a scotch and soda from each of the following standard recipes. a. 1 ounce of scotch and 6 ounces of club soda b. 1 1/2 ounches of scotch and 7 ounces of club soda c. 2 ounces of scotch and 6 ounces of club soda 7. In each of the examples in Question...

Convert 32 mg/L to grams per hectorliter. Please show work.

Suppose the storage cost for gold is $70 per ounce per year and the interest rate...

Suppose the storage cost for gold is $70 per ounce per year and the interest rate for borrowing or lending is 3% per annum, compounded continuously. Storage costs are assessed when you take delivery of the gold, but you can pay them at a later date with accumulated interest. 1. Show how you could make an arbitrage profit if the June and December futures contracts for a particular year trade at $1,350 (spot price) and $1,400 per ounce (spot price),...

The table to the right shows the cost per ounce (in dollars) for a random sample...

The table to the right shows the cost per ounce (in dollars) for a random sample of toothpastes exhibiting very good stain removal, good stain removal, and fair stain removal. At alpha=0.05, can you conclude that the mean costs per ounce are different? Perform a one-way ANOVA test by completing parts a through d. Assume that each sample is drawn from a normal population, that the samples are independent of each other, and that the populations have the same variances....

Show your work please Below are the results of a study. Through the sample of the...

Show your work please Below are the results of a study. Through the sample of the first 49 Super Bowls, 28 of them were won by teams in the National Football Conference (NFC). A 0.1% (1/10 of 1%) significance level was used to test the claim that the probability of an NFC team Super Bowl win is greater than one-half. Confirm the results with a confidence interval. a) What is the range of the confidence interval? b) Does the confidence...

Question