1. Asempa Ltd stock has a bid price of GH40.95 and an ask price of GH41.05. Assume there is a GH20 brokerage commission.

1. What amount will you pay to buy 100 shares?
2. What amount will you receive for selling 100 shares?
3. Suppose you buy 100 shares, then immediately sell 100 shares with the bid and ask prices being the same in both cases. What is your round-trip transaction cost?

3.5 Mark

2. Clearing houses helps reduce the risk to individual traders within the futures Market. Critically discuss how this is achieved. 4 Mark

3. Consider the following 6-months diamond futures contract

Contract Size	100 ounces
Initial margin requirement	$6,100
Maintenance margin requirement	$5500
Opening price	$1,200 per ounce
Initial contract value	$1,200 per ounce

In January 1, a trader buys 3 diamond futures contract for June delivery. The June contract rises to $1,220 per ounce in three months.

Required.

Determine the Current profit or loss and the status of the margin accounts for

1. The buyer
2. The seller

5 Marks

1. The $/ spot foreign exchange rate = 5.7; US dollar interest rate = 3% p. and the Cedi interest rate = 26% p.a.

1. Calculate the three month forward FX rate between the cedi and the dollar.

Based on your answer in (i), indicate whether the cedi is trading at a discount or at a premium to the US dollar. Explain why the cedi may be trading at a discount or at a premium to the US dollar.