a) For investors and borrowers considering setting up a risk management strategy using Futures Contracts, there is a basic rule that determines the timing of the various buy/sell transactions. Specify and explain this rule, giving examples from an investor's and a borrower's viewpoint. b) Anna bought an option contract on Telstra shares with an exercise price of $60 and an expiry date in one month. The market price for Telstra shares today is $57.21. The call price is trading at $0.25. i. ii. Calculate the break-even amount for the call position and draw a fully labelled diagram for both buyer of the option and seller of the option. At what minimum share price will the option buyer exercise the option on the expiration date? Provide reasoning in your answer. 1. Price of a bond, debenture and note at a coupon date P= 1-(1+i) A(1+i 2. Price of a bond, debenture and note between coupon dates (above formula adjusted by (1+1)* 1-(1+i)" + A(1+i)" (1+i) 3. Calculation of payment when present value (A) known e.g. instalment on mortgage loan A R 1-(1+i)" i 4. Pricing a Share with a Constant Dividend Do Po = rs 5. Pricing a Share with a Constant Dividend Growth Rate Do(1 + g) P = rs - g 6. Discount Securities - calculation of price and yield 6.1. Price = 365 x face value 365 + (yield/100 x days to maturity) 6.2. Yield = (sell price - buy price) x (days in a year x 100) buy price x days to maturity 7. Value of a Right V=N (cum rights price-subscription price) N+1