Suppose that a Canadian Company, Maple Leaf Inc., is exporting its products to Australia in Nov.

Upon this transaction, Maple Leaf will receive $$60$ M AUD $6$ months later. If Maple Leaf Inc.

wants to lock in their exchange rate, what could they do$?$ What type of Trader is Maple Leaf

Inc.? What are the main differences between a Forward and a Future's contract?

A trader is looking at purchasing one $3-$month futures contracts on frozen orange juice

concentrate. Each contract is for delivery of $15,000$ pounds. The current spot price is $$1\mathrm{.}60$ per

pound, and the risk$-$free rate is $6\%.$ Ignore transaction and storage costs. What is the Futures

price according to the no$-$arbitrage principle? If the futures price is trading at $$1\mathrm{.}50,$ what would

be your arbitrage profit $($show your steps$)?$

On December $1,$ an investor holds $50,000$ shares of a certain stock. The market price is $$30$ per

share. The investor is interested in hedging against movements in the market over the next

month an decides to use an index futures contract. The index futures price is currently $1,500$

and one contract is for delivery of $$50$ times the index. The beta of the stock is $1\mathrm{.}3.$ What

strategy should the investor follow? Under what circumstances will it be profitable?

The $6-$month and $1-$year zero rates are both $5\%$ per annum. For a bond that has a life of $18$

months and pays coupon of $4\%$ per annum $($with semi$-$annual payments and one having just

been made$),$ the yield is $5\mathrm{.}2\%$ per annum. What is the bond's price?? What is the $18-$month zero

rate? All rates are quoted with semi$-$annual compounding.

A $5-$year bond with a yield of $7\%($continuously compounded$)$ pays an $8\%$ coupon at the end of

each year. What is the bond's price? What is the bond's duration? Use the duration to calculate

the effect on the bond's price of a $0\mathrm{.}2\%$ decrease in its yield.