Question 4

The S&P 500 index has a dividend yield of 4.0 percent. Suppose you enter into an 11.0-month forward contract to buy the S&P 500 index. The current value of the index equals $1126.0 and the risk-free interest rate is 10.0 percent continuously compounded. What is the forward price?

990.38

1280.2

1189.7

1065.7

Question 5

The interest rate in Great Britain is 5.0 percent per year and the interest rate in the USA is 6.0 percent. If the spot exchange rate is 1.3 dollars per pound, what is the price of an 11-month forward contract to buy the British pound?

1.1753

1.4379

1.3120

1.2881

Question 6

Mogul oil company will sell 7000 barrels of oil in 3 months. Suppose Mogul hedges the risk by selling futures on 7000 barrels of oil. The current oil futures price is $15.6 dollars per barrel. If in 3 months the spot price of oil is $15.0 and the futures price is $15.9 per barrel, what is Mogul's effective price of oil per barrel?

16.5

17.0

14.7

15.3

Question 7

Mogul oil company will sell 9000 barrels of oil in 2 months. Suppose Mogul hedges the risk by selling futures on 7200.0 barrels of oil. The current oil futures price is $21.1 dollars per barrel. If in 2 months the spot price of oil is $20.5 and the futures price is $21.8 per barrel, what is Mogul's gain on the futures transaction and effective price per barrel?

-5040.0 and 21.06

5040.0 and 19.94

5040.0 and 21.06

-5040.0 and 19.94