QUESTION FOUR
A. The price of oil is K100 per barrel. Oil prices are expected to grow at 4% per year. The one-year risk-free rate of interest is 2% in simple terms. It costs K1 to store a barrel of oil for one year. If oil has no costs or benefits of carry, what is the theoretical one-year forward price of oil?
B. A non-interest-bearing asset has a spot price of K100. It costs 1% per annum (on a simple rate basis) to store the asset. Simple interest rates are 5% per annum. What is the fair one-year forward price?
C. Consider a forward start option which, 1 year from today, will give its owner a 1-year European call option with a strike price equal to the stock price at that time. You are given: (i) The European call option is on a stock that pays no dividends.
(ii) The stock’s volatility is 30%.
(iii) The forward price for delivery of 1 share of the stock 1 year from today is 100.
(iv) The continuously compounded risk-free interest rate is 8%. Required: Under the Black-Scholes framework, determine the price today of the forward start option.
In: Accounting
A Company produces colorful 100% cotton shirts and the entity needs 50,000 kilos of raw materials in the production process. On December 1, 2018, the entity purchased a call option as a cash flow hedge to buy 50,000 kilos on July 1, 2019. The option strike price is P100 per kilo. The entity paid P50,000 for the call option. This derivative option contract means that if the market price is higher than P100, the entity can exercise the option and buy the asset at the strike option price of P100. If the market price is lower than P100, the entity can throw away the option and buy the asset at the cheaper price. The market price per kilo is P110 on December 31, 2018 and P115 on July 1, 21019.
1. What is the derivative asset on December 31,
2018?
2 what is the cash settlement from the speculator on July 1,
2015.
3 Assume the market price is P110 on December 31, 2018 and P90 on
July 1, 2019. What amount should be recognized as loss on call
option in 2019?
4. Assume the market price is P110 on December 31, 2018 and P90 on
July 1, 2019. What is the derivative liability on July 1, 2019?
In: Finance
You purchase 100 shares of stock at $100 ($10,000); the margin requirement is 40 percent. What are the dollar and percentage returns if
a) you sell the stock for $112 and bought the stock for cash?
b) you sell the stock for $90 and bought the stock on margin?
c) you sell the stock for $60 and bought the stock on margin?
Please provide step-by step on how to solve in Excel
In: Finance
Suppose that consumption is 200, Government spending is 100, Investment is 100. Moreover, suppose that exports are equal to 50 while imports are 150.
(a) What is the value of the current account? Does this country have a current account deÖcit or surplus?
(b) What is the GNP of this economy?
(c) What is the value of national saving? (d) Suppose that taxes are equal to 50. Calculate the private saving and the government budget deÖcit
In: Economics
Which of the following transfers is most efficient?
| a. |
$100 in cash |
|
| b. |
$100 medical care tax credit |
|
| c. |
$10 itunes gift card |
|
| d. |
$100 health insurance subsidy |
In: Economics
The client has insulin infusion 100 units of insulin in 100 mls of normal saline. The dose in 5 units per hour. How many mls per hour will the nurse program the pump to run?
In: Nursing
Suppose an experimenter wishes to test
H0: µ = 100 vs H1: µ ≠ 100
at the α = 0.05 level of significance and wants 1 – β to equal 0.60 when µ = 103. What is the smallest (i.e. cheapest) sample size that will achieve the objective? Assume the variable being measured is normally distributed with σ = 14.
In: Statistics and Probability
What is the present value of a $100-payment, 100-year annuity due if the interest rate is 14% per year? What is the future value of a $50-payment, 50-year annuity due if the interest rate is 9% per year?
In: Finance
Times (in seconds) for the 100 freestyle and 100 backstroke were recorded for three top swimmers on a university swim team: 46.17 and 50.05; 46.72 and 50.22; 46.89 and 52.95.
(a) Assuming these to be representative samples of all top swimmers' times for the two events, use software to produce a 95% confidence interval for the mean of the time differences, freestyle minus backstroke, for the two events
In: Statistics and Probability
Consider:
(a) Stock trades for $100;
(b) Calls with exercise prices of $90, $100, and $110 trade at prices of $17.03, $10.38, and $6.50 respectively.
If a person buys a $90 call, writes two $100 calls, and buys a $110 call, what is the magnitude of her maximum loss? The answer is 2.77, how do you solve?
Type or paste question here
In: Finance