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Question 14 4 points Saved Suppose a trader observes the following prices on June 15 (6/15 = t). The futures price of gold for September
Question 14 4 points Saved Suppose a trader observes the following prices on June 15 (6/15 = t). The futures price of gold for September 15 (= T1) delivery is $450/oz. That is FT1 = $450. The futures price of gold for December 15 (= T2) delivery is $460/oz. That is FT2 = $460. The borrowing and lending rate is 4% per annum and the storage cost T1CT2 is $2.00, which is payable on 12/15. Assume FT2 = FT1 (1 + T11T2) + T1CT2 is the equilibrium situation. What is the arbitrage profit? $3.50 $2.50 0 $1.75 $2.00 A Moving to another question will save this response. Question 14 of 25 > >> Question 15 4 points Save Answer Assume FT2 = tFT1 (1 +T11T2) + T1CT2 is the equilibrium situation. Also assume that T2-T1 is one year, that T1CT2 = $1 and that T1/T2 = 10%. Assume the initial prices are FT1 = 100 & [FT2 = 133. A trader goes long the FT1 contract and short the FT2 contract believing these are not equilibrium prices and that he will profit when they adjust to equilibrium. Say the next day, t + 1, the t+1FT1 price moves to 115 and t+1FT2 adjusts to an equilibrium price. If the trader round trips his positions on day t+1, what is his profit or loss on the FT2 position? cannot be determined from the information given loss of 11 profit of 5.5 O profit of 11 Question 16 4 points Saved It is March 1 and a corporate treasurer learns that he will receive $2 million on May 1 that will be needed for a major capital investment. He plans to issue 6-month maturity commercial paper when he receives that money. Concerned about the prospect of rising interest rates he decides to hedge using a June T-Bill futures contract whose IMM futures price is 90.89 (i.e. FIMM = 90.89). What is the duration-based hedge ratio? long about 8 T-Bill futures contracts short about 8 T-Bill futures contracts o none of these other answers are correct O long about 4 T-Bill futures contracts O short about 4 T-Bill futures contracts O
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