1. Almodad entered into a contract to purchase 10 June Futures Gold on March 1,2018, i.e., the total number of contracts ALA is entering into is 100. The futures price per contract is $8, 000 and one contract amounts to 20 oz. As per the margin requirement set by the clearing house, the initial margin is 5% of the total value of the contract, while the variable margin is 85% of the initial margin. Data related to the settlement prices obtained from the clearing house over the last four days are given below.

Date Settlement price per oz

March 1 $ 402

March 2 $403

March 3 $404

March 4 $401

March 5 $399

March 6 $378

Required: Compute:

a) The initial margin

b) The variable maintenance

c) The gain/loss each day

d) The margin call if any

2. Given a 3 into 5 FRA:

a) what is the maturity of the forward contract?

b) What is the loan maturity?

3. Suppose that you issue a bond with coupon rate at LIBOR plus 4%. Suppose you set a cap of 10%. What is the coupon rate you should pay if LIBOR is 5%?

4. Suppose you buy a bond that pays a coupon rate of LIBOR plus 3%. To minimize the risk (fall of LIBOR), you set a floor at 12%. What is the coupon rate you will get if LIBOR is 8%?

5. Suppose that you were to purchase a call option on shares of Intel (INTC) with a strike price of $110 and an expiration date of May 20th for which you pay $3 per share. This option would give you the right to purchase 200 shares of Intel at a price of $110 on May 20th. If Intel is trading its shares at $ 98 per on May 20th , will you exercise your right? If yes, what is your gain/loss? If no, why?

6. Suppose you were to purchase a put option on shares of Microsoft (MSFT) with a strike price of $80 and an expiration date of March 20th for which you pay a premium of $1 per share. If Microsoft is trading its shares at $ 87 per share on March 20th , will you exercise your right? If yes, how much is your gain/loss? If no, why?