Part III. Further Questions (3x20scores) John owns an assets worth $150, which he plans to sell in 6 months. To hedge against the possible decline in the price of an asset, he decides to take the short position in a forward contract on the asset. The risk-free rate is given as 5.925%. (a) What is the no-arbitrage forward price of the contract? (b) Given that 3 months into the term of the contract the spot price of the underlying is 8. $145.45, what is the value of the short position? (c) Given that at contract maturity the spot price of the underlying asset is actually $140 what is the value of the short position at expiration? Suppose you are a fund manager managing a portfolio worth $10million with Beta equal 0.8. The index futures price is 1000 and each future contracts is on $50 times the index. If you want to keep the value of the portfolio stable without selling the portfolio in the next two months, what is your hedging strategy? On the maturity date, the index is 1050, please show the success of your strategy. The risk-free interest rate is 6% per annum. 9. 10. The two-month interest rates in Switzerland and the United States are 1% and 2% per pectively, with quarterly compounding. The spot price of the Swiss franc is annum, res $1.0600. The futures price for a contract deliverable in two months is also $1.0500 arbitrage opportunities does this create? What are your strategies and how much can yo earn