A Short Forward contract on sugar cane was negotiated some time ago that will expire in three months time and has a forward delivery price of $400 per Metric Ton The current forward price for three month forward contract is $420 The three month risk free interest rate (with continuous compounding) is 8 p a What is the value of the short forward contract at this point of time A $27 92 B $27 92 C $20 00 D $35 68 What arbitrage actions should a trader do when the one year forward price of an asset is underpriced Assume that the asset provides no income and no storage costs involved The trader should borrow the price of the asset, buy one unit of the asset now and enter into a short forward contract to sell the asset in one year The trader should borrow the price of the asset, buy one unit of the asset and enter into a long forward contract to buy the asset in one year The trader should short the asset, invest the proceeds of the short sale at the risk free rate, enter into a short forward contract to sell the asset in one year The trader should short the asset, invest the proceeds of the short sale at the risk free rate, enter into a long forward contract to buy the asset in one year Assuming that you are going for a 1 year Long Forward contract on 1,000 Gold bullions that is currently priced at $25,000 each bullion The storage cost will be $400 each bullion for 1 year and to be paid in advance half yearly The risk free interest rate is 10 p a for all maturities If the 1 year forward price of each Gold bullion is quoted as $28,060 57, what will be the arbitrage profit for each bullion $0 00 $31 29 $66 03 $250 00 You took a short position in 20 September Crude Palm Oil Future (FCPO) contracts Each contract is to deliver 25 metric tons of CPO As you entered the CPO Futures today the September CPO futures is trading at RM 2,200 per metric tone You deposited an initial margin of RM55,000 and the maintenance margin is RM40,000 On the 7 th trading day the CPO price had increased to RM 2,230 per metric tone which led to a margin call of RM15,000 On the 23 rd trading day the September CPO Futures were trading at RM 2,180 per metric ton and you decided to close out your position The one round total brokerage fee is RM620 Calculate your profit or loss in this September CPO Futures trading RM 9,380 gain RM 9,380 (loss) RM 10,000 gain RM 10,000 (loss)

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Posted on Sep 27, 2024

A Short Forward contract on sugar cane was negotiated some time ago that will expire in three-months time and has a forward delivery price of $400 per Metric Ton. The current forward price for three-month forward contract is $420. The three-month risk-free interest rate (with continuous compounding) is 8% p.a. What is the value of the short forward contract at this point of time?

A. +$27.92

B. $27.92

C. +$20.00

D. $35.68

What arbitrage actions should a trader do when the one-year forward price of an asset is underpriced? Assume that the asset provides no income and no storage costs involved.

The trader should borrow the price of the asset, buy one unit of the asset now and enter into a short forward contract to sell the asset in one year.

The trader should borrow the price of the asset, buy one unit of the asset and enter into a long forward contract to buy the asset in one year.

The trader should short the asset, invest the proceeds of the short sale at the risk-free rate, enter into a short forward contract to sell the asset in one year.

The trader should short the asset, invest the proceeds of the short sale at the risk-free rate, enter into a long forward contract to buy the asset in one year.

Assuming that you are going for a 1 year Long Forward contract on 1,000 Gold bullions that is currently priced at $25,000 each bullion. The storage cost will be $400 each bullion for 1 year and to be paid in advance half yearly. The risk free interest rate is 10% p.a. for all maturities. If the 1-year forward price of each Gold bullion is quoted as $28,060.57, what will be the arbitrage profit for each bullion?
1. $0.00
2. $31.29
3. $66.03
4. $250.00

You took a short position in 20 September Crude Palm Oil Future (FCPO) contracts. Each contract is to deliver 25 metric tons of CPO. As you entered the CPO Futures today the September CPO futures is trading at RM 2,200 per metric tone. You deposited an initial margin of RM55,000 and the maintenance margin is RM40,000. On the 7^th trading day the CPO price had increased to RM 2,230 per metric tone which led to a margin call of RM15,000. On the 23^rd trading day the September CPO Futures were trading at RM 2,180 per metric ton and you decided to close out your position. The one round total brokerage fee is RM620. Calculate your profit or loss in this September CPO Futures trading?
1. RM 9,380 gain
2. RM 9,380 (loss)
3. RM 10,000 gain
4. RM 10,000 (loss)