{ "key_pair_value_system": true, "answer_rating_count": "", "question_feedback_html": { "html_star": "", "html_star_feedback": "" }, "answer_average_rating_value": "", "answer_date_js": "2024-06-20T19:05:13-04:00", "answer_date": "2024-06-20 19:05:13", "is_docs_available": "", "is_excel_available": "", "is_pdf_available": "", "count_file_available": 0, "main_page": "student_question_view", "question_id": "3356661", "url": "\/study-help\/questions\/a-10-points-you-are-a-junior-trader-at-alz-3356661", "question_creation_date_js": "2024-06-20T19:05:13-04:00", "question_creation_date": "Jun 20, 2024 07:05 PM", "meta_title": "[Solved] a) (10 points). You are a junior trader a | SolutionInn", "meta_description": "Answer of - a) (10 points). You are a junior trader at ALZ Investments Corp, responsible for trading gold futures contracts. The p | SolutionInn", "meta_keywords": "10,points,junior,trader,alz,investments,corp,responsible,trading,gold,futures,contracts", "question_title_h1": "a) (10 points). You are a junior trader at ALZ Investments Corp, responsible for trading gold futures contracts. The price of one ounce of gold", "question_title": "a) (10 points). You are a junior trader at ALZ Investments Corp,", "question_title_for_js_snippet": "a) (10 points) You are a junior trader at ALZ Investments Corp, responsible for trading gold futures contracts The price of one ounce of gold is $1,800 For simplicity, suppose the interest rate is 0 The annual storage cost of gold is $20 per ounce per year Consider two gold futures contracts, expiring 1 year from now (2022) and 2 years from now (2023), respectively What are the fair prices of these 2 contracts b) (10 points) Suppose, next year in 2022, the price of gold rises to $2,000 The interest rate remains at 0 , and the storage cost remains at $20 per year What will the fair price of the 2023 contract be, in 2022 c) (10 points) We are back in the present, in 2021 Suppose you think that interest rates will stay the same, but gold storage costs are likely to decline you think the cost of storing gold will be $10 from 2022 onwards However, you have a brokerage account, but no storage space for gold, so you can't actually buy any physical gold How can you use gold futures contracts to make a bet on gold storage costs declining, without holding any exposure to the risk that gold prices change, and also without holding any physical gold at any point Formally, construct a portfolio which profits from gold storage costs declining, but whose value is unaffected by changes in the level of gold prices, and which does not require ever buying and storing (or selling) any physical gold d) (10 points) You have made substantial profits speculating on storage costs using gold futures contracts, so you have been promoted to run the firm's wheat futures desk For simplicity, assume interest rates are 0 We are in March 2021 (month 3), and the price of wheat is currently $5 per bushel Consider two wheat futures contracts, expiring in June 2021 (month 6) and September 2021 (month 9) Wheat can be stored for $1 per bushel per month Wheat can also be planted in March The total cost of buying a bushel of wheat seeds, planting the seeds, and growing the seeds into a bushel of wheat is $3 However, wheat takes six months to grow (i e if planted now, it can be harvested in September) For simplicity, suppose that one bushel can be harvested in September for each bushel planted in March What are the fair prices of the June and September wheat futures contracts ", "question_description": "

a) (10 points). <\/strong>You are a junior trader at ALZ Investments Corp, responsible for trading gold futures contracts. The price of one ounce of gold is $1,800. For simplicity, suppose the interest rate is 0%. The annual storage cost of gold is $20 per ounce per year. Consider two gold futures contracts, expiring 1 year from now (2022) and 2 years from now (2023), respectively. What are the fair prices of these 2 contracts? <\/p>

b) (10 points). <\/strong>Suppose, next year in 2022, the price of gold rises to $2,000. The interest rate remains at 0%, and the storage cost remains at $20 per year. What will the fair price of the 2023 contract be, in 2022? <\/p>

c) (10 points). <\/strong>We are back in the present, in 2021. Suppose you think that interest rates will stay the same, but gold storage costs are likely to decline: you think the cost of storing gold will be $10 from 2022 onwards. However, you have a brokerage account, but no storage space for gold, so you can't actually buy any physical gold. How can you use gold futures contracts to make a bet on gold storage costs declining, without holding any exposure to the risk that gold prices change, and also without holding any physical gold at any point? Formally, construct a portfolio which profits from gold storage costs declining, but whose value is unaffected by changes in the level of gold prices, and which does not require ever buying and storing (or selling) any physical gold. <\/p>

d) (10 points). <\/strong>You have made substantial profits speculating on storage costs using gold futures contracts, so you have been promoted to run the firm's wheat futures desk. For simplicity, assume interest rates are 0%. We are in March 2021 (month 3), and the price of wheat is currently $5 per bushel. Consider two wheat futures contracts, expiring in June 2021 (month 6) and September 2021 (month 9). Wheat can be stored for $1 per bushel per month. Wheat can also be planted in March. The total cost of buying a bushel of wheat seeds, planting the seeds, and growing the seeds into a bushel of wheat is $3. However, wheat takes six months to grow (i.e. if planted now, it can be harvested in September). For simplicity, suppose that one bushel can be harvested in September for each bushel planted in March. What are the fair prices of the June and September wheat futures contracts?<\/p>", "transcribed_text": "", "related_book": { "title": "Principles Of Cost Accounting", "isbn": "978-0840037039, 0840037031", "edition": "15th Edition", "authors": "Edward J. Vanderbeck", "cover_image": "https:\/\/dsd5zvtm8ll6.cloudfront.net\/si.question.images\/book_images\/81.jpg", "uri": "\/textbooks\/principles-of-cost-accounting-15th-edition-9780840037039", "see_more_uri": "" }, "free_related_book": { "isbn": "0367453800", "uri": "\/textbooks\/instrumental-methods-in-metal-ion-speciation-1st-edition-978-0367453800-162523", "name": "Instrumental Methods In Metal Ion Speciation", "edition": "1st Edition" }, "question_posted": "2024-06-20 19:05:13", "see_more_questions_link": "\/study-help\/questions\/business-corporate-finance-2020-July-01", "step_by_step_answer": "The Answer is in the image, click to view ...", "students_also_viewed": [ { "url": "\/briefly-state-the-purposes-of-a-statement-of-cash-flows", "description": "Briefly state the purposes of a statement of cash flows.", "stars": 3 }, { "url": "\/study-help\/using-interpreting-statistics\/a-neuroscientist-believes-that-proteins-form-plaques-in-the-brain", "description": "A neuroscientist believes that proteins form plaques in the brain that cause Alzheimers disease. He gets a sample of older adults, measures the nanograms\/liter of protein in spinal fluid, and...", "stars": 3 }, { "url": "\/study-help\/introduction-to-probability-statistics\/223-driving-emergencies-the-length-of-time-required-for-an-1980968", "description": "2.23 Driving Emergencies The length of time required for an automobile driver to respond to a particular emergency situation was recorded for n = 10 drivers. The times (in seconds) were 0.5, 0.8,...", "stars": 3 }, { "url": "\/mitsubishi-corp-a-broadly-diversified-japanese-corporation-instituted-a-credit", "description": "Mitsubishi Corp., a broadly diversified Japanese corporation, instituted a credit plan called Three Diamonds for customers who buy its major electronic products, such as large-screen televisions and...", "stars": 3 }, { "url": "\/study-help\/questions\/ivanhoe-company-purchased-on-january-1-2-0-2-9739026", "description": "Ivanhoe company purchased on January 1 , 2 0 2 5 , as an available for sale security , 6 8 , 0 0 0 $ of the 8 % , 5 year bonds of Marx corporation for $ 6 2 , 8 4 5 . which provides an 1 0 % return....", "stars": 3 }, { "url": "\/study-help\/questions\/swifty-limited-has-signed-a-lease-agreement-with-lantus-corp-1729836", "description": "Swifty Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $170,000....", "stars": 3 }, { "url": "\/study-help\/questions\/assume-that-the-state-of-florida-passed-a-law-banning-2963596", "description": "Assume that the State of Florida passed a law banning the importation of baitfish. This is an environmental law designed to protect the state's fish from nonnative predators and parasites....", "stars": 3 }, { "url": "\/study-help\/questions\/you-have-a-food-budget-for-the-week-of-50-2848629", "description": "You have a food budget for the week of $50, which you can spend on rice or vegetables. Rice costs $1 per meal, and vegies cost $4 per meal. Your main preference is to have 20 meals per week. Fewer...", "stars": 3 }, { "url": "\/study-help\/questions\/prior-to-beginning-work-on-this-discussion-forum-review-chapters-5366525", "description": "Prior to beginning work on this discussion forum, review Chapters 1, 2 and 3 of your textbook, Principles of Microeconomics and the materials on the \"Weekly Lecture\" page. The demand for plums is...", "stars": 3 }, { "url": "\/study-help\/questions\/creating-graphical-display-the-newly-created-data-set-will-be-1344730", "description": "Creating graphical display The newly created data set will be used to compare the BMI of smokers to non-smokers. Create the following graphs in Excel: Using the column labeled Smoker (not sorted by...", "stars": 3 }, { "url": "\/study-help\/questions\/case-study-given-the-recent-covid19-pandemic-the-academic-staff-1008232", "description": "Case Study Given the recent Covid-19 pandemic, the academic staff of York Town Primary School (YTPS) has been mandated to work from home. This would mean that both teachers and students remain home...", "stars": 3 }, { "url": "\/study-help\/questions\/lone-star-company-is-a-calendaryear-corporation-and-this-year-3557673", "description": "Lone Star Company is a calendar-year corporation, and this year Lone Star reported $120,000 in current E&P that accrued evenly throughout the year. At the beginning of the year, Lone Star's...", "stars": 3 } ], "next_back_navigation": { "previous": "\/study-help\/questions\/the-height-of-your-workstation-desk-is-one-of-the-3356660", "next": "\/study-help\/questions\/assess2cid141754aid10086509skip5-myopenmath-home-my-classes-user-settings-3356662" }, "breadcrumbs": [ { "name": "Study help", "link": "https:\/\/www.solutioninn.com\/study-help\/questions-and-answers" }, { "name": "Business", "link": "https:\/\/www.solutioninn.com\/study-help\/questions-and-answers\/business" }, { "name": "Economics", "link": "https:\/\/www.solutioninn.com\/study-help\/questions\/business-economics" }, { "name": "a) (10 points). You are a junior trader at ALZ Investments Corp,", "link": "https:\/\/www.solutioninn.com\/study-help\/questions\/a-10-points-you-are-a-junior-trader-at-alz-3356661" } ], "skill_details": { "skill_id": "12", "skill_name": "Economics", "parent_id": "1" } } } }