How much is a basis point 1 0 0 1 0 01 0 001 Suppose that the risk free interest rate is 6 per annum with continuous compounding and that the dividend yield on a stock index is 4 per annum Currently, the index is trading at 1100, calculate the fair forward price for a contract on this index deliverable in 5 months 1000 1100 1109 1110 The quoted 9 month forward price of 916 Gold is $280 per gram The spot price of the 916 Gold is $222 per gram now Considering the storage cost is 10 of its spot price per annum and the risk free interest rate is 8 p a continuously compounded, the 9 month fair forward price of this 916 Gold should be $280 $254 $250 $276 Based on the information given in question 23, if the storage cost is given as $25 per gram per annum payable at the end of the 9 month contract, identify what would be the arbitrage profit $69 27 $23 54 $19 28 $0 00 It is 1 st April today and assuming that your company need to borrow $300,000,000 on 1 st July for next 3 months You are planning to use the Eurodollar Futures (EF) to hedge the possible change in the Libor rate between now and 1 st July The July EF is trading at 95 33 now and it turned out that on 1 st July the EF is trading at 95 96 There are 92 days between 1 st July to 1 st October What would be your total interest payment for this borrowing upon the settlement of it on 1 st October $1,677,128 $3,574,038 $2,624,160 $3,569,160 Which of the following statement is true Hedging can always be done more easily by a companys shareholders than by the company itself If all companies in an industry hedge, a company in the industry can sometimes reduce its risk by choosing not to hedge If all companies in an industry do not hedge, a company in the industry can reduce its risk by hedging If all companies in an industry do not hedge, a company is liable increase its risk by hedging Which of the following statement is true Gold producers should always hedge the price they will receive for their production of gold over the next three years Gold producers should always hedge the price they will receive for their production of gold over the next one year The hedging strategies of a gold producer should depend on whether it shareholders want exposure to the price of gold Gold producers can hedge by buying gold in the forward market A stock index currently stands at 350 The risk free interest rate is 7 per annum (with continuous compounding) and the dividend yield on the index is 4 per annum (with continuous compounding) The forward price for a four month contract should be 352 5 True False You enter into a short Eurodollar futures contract at a price of 99 65 and close it out a week later at a price of 99 50 You have gained $150 on the position True False The physical market price of premium olive oil is $30 per liter A futures contract on 100,000 liters with settlement in 1 year is currently priced at $33 20 per liter The one year interest rate is 7 p a (continuously compounded) and it costs $0 50 per liter per year (payable at the beginning of each year) to store olive oil You can make riskless arbitrage profit of $48,885 (to the nearest dollar) by buying 100,000 liters of physical olive oil, storing it and selling one futures contract True False

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Suppose that the risk-free interest rate is 6% per annum with continuous compounding and that the dividend yield on a stock index is 4% per annum. Currently, the index is trading at 1100, calculate the fair-forward price for a contract on this index deliverable in 5 months.
1. 1000
2. 1100
3. 1109
4. 1110

The quoted 9-month forward price of 916 Gold is $280 per gram. The spot price of the 916 Gold is $222 per gram now. Considering the storage cost is 10% of its spot price per annum and the risk free interest rate is 8% p.a. continuously compounded, the 9-month fair-forward price of this 916 Gold should be

Based on the information given in question 23, if the storage cost is given as $25 per gram per annum payable at the end of the 9-month contract, identify what would be the arbitrage profit?
1. $69.27
2. $23.54
3. $19.28
4. $0.00

It is 1^st April today and assuming that your company need to borrow $300,000,000 on 1^st July for next 3 months. You are planning to use the Eurodollar Futures (EF) to hedge the possible change in the Libor rate between now and 1^st July. The July EF is trading at 95.33 now and it turned out that on 1^st July the EF is trading at 95.96. There are 92 days between 1^st July to 1^st October. What would be your total interest payment for this borrowing upon the settlement of it on 1^st October?
1. $1,677,128
2. $3,574,038
3. $2,624,160
4. $3,569,160

Hedging can always be done more easily by a companys shareholders than by the company itself
If all companies in an industry hedge, a company in the industry can sometimes reduce its risk by choosing not to hedge
If all companies in an industry do not hedge, a company in the industry can reduce its risk by hedging
If all companies in an industry do not hedge, a company is liable increase its risk by hedging

Gold producers should always hedge the price they will receive for their production of gold over the next three years
Gold producers should always hedge the price they will receive for their production of gold over the next one year
The hedging strategies of a gold producer should depend on whether it shareholders want exposure to the price of gold
Gold producers can hedge by buying gold in the forward market

A stock index currently stands at 350. The risk-free interest rate is 7% per annum (with continuous compounding) and the dividend yield on the index is 4% per annum (with continuous compounding). The forward price for a four-month contract should be 352.5.

You enter into a short Eurodollar futures contract at a price of 99.65 and close it out a week later at a price of 99.50. You have gained $150 on the position.

The physical market price of premium olive oil is $30 per liter. A futures contract on 100,000 liters with settlement in 1 year is currently priced at $33.20 per liter. The one-year interest rate is 7% p.a. (continuously compounded) and it costs $0.50 per liter per year (payable at the beginning of each year) to store olive oil. You can make riskless arbitrage profit of $48,885 (to the nearest dollar) by buying 100,000 liters of physical olive oil, storing it and selling one futures contract.