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Problem2 background: My question:: (10 pt each) Today is 05/01/20xx. You have a commodity to sell in a month, and you would like to lock
Problem2 background:
My question::
(10 pt each) Today is 05/01/20xx. You have a commodity to sell in a month, and you would like to lock the price at $100 by hedging with futures. Since you are not selling a professionally traded commodity, you take a modified version of futures contract which is marked to the market every week as opposed to every day. The margin account is non- interest-bearing, has an initial margin of $50 and no maintenance margin. The futures price of the commodity you are selling is $104 on 05/08, $98 on 05/15, $94 on 05/22, and $102 on 05/29. Assume you enter the contract today and will make the delivery on 05/30, using the 05/29 price. Assume one year consists of 52 weeks. 3. (10 pt) Today is still 05/01/20xx. A manufacturer plans to buy the commodity in the above problem (No.2) on 05/01, 05/15, and on 05/29, and wants to use a plain vanilla swap to pay the same amount for each purchase. What is the equal payment? Assume there is only one interest rate 5.2%, weekly compounding. (10 pt each) Today is 05/01/20xx. You have a commodity to sell in a month, and you would like to lock the price at $100 by hedging with futures. Since you are not selling a professionally traded commodity, you take a modified version of futures contract which is marked to the market every week as opposed to every day. The margin account is non- interest-bearing, has an initial margin of $50 and no maintenance margin. The futures price of the commodity you are selling is $104 on 05/08, $98 on 05/15, $94 on 05/22, and $102 on 05/29. Assume you enter the contract today and will make the delivery on 05/30, using the 05/29 price. Assume one year consists of 52 weeks. 3. (10 pt) Today is still 05/01/20xx. A manufacturer plans to buy the commodity in the above problem (No.2) on 05/01, 05/15, and on 05/29, and wants to use a plain vanilla swap to pay the same amount for each purchase. What is the equal payment? Assume there is only one interest rate 5.2%, weekly compoundingStep by Step Solution
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