TABLE 23.2 Sample CME Group Futures Options Price Quotations Prior H/LOW Charts Change LOW Underying Future May 2017 Updates 1638 CT 10 2017 3772 OTO 3570 3780 Type: American Options Expiration: May 2017 Strike Range: At The Money Calls Puts LOW Lt Volume stra Price Updated High Prior Sottle Change Low Last Last Pro Change Settle LOW High Volume Limi! Updated 231 274 237 257 5 3600 54 55 53 NO 591 Lt 00 10 F 2017 CT 10 FD 00 NO 163837 CT 10 235 3650 67 24 73 70 163854 CT 10 Feb No 1638.67 CT 10 Pro 702 203 91 55 197 3700 80 NO 917 Lt . 16 3800 CT 10 Feb 2017 NO 16.30:00 CT 10 F 2017 163 171 3750 103 117 103 107 NO 3.919 LIME 163000 CT 10 Feb 2017 NO 16.38:37 CT 10 Fe 2017 -51 45 NO 1000 Lt 16:3824 CT 10 Feo 3 00 NO 44 125 97 . 175 CT 10 2017 NO om 00 16 3800 CT 100 2017 09 16.30:47 No LIE! 00 186 110 84 61 1045 2900 re 207 No 183 LIM 00 10 Fee 2017 CT 10 FD 2017 NO NO 77 66 13 . . 163828 CT 10 2017 10 2017 00 NO 1638.68 CT 10 2017 230 75 13 282 - . NO 11 LIMI 16:38:41 CT 10 D 2017 ! 00 57 CT 10 FD 2017 22 NO Limit 00 16.39.00 CT 10 Feb 2017 00 About This epon Source: CME Group (www.cmegroup.com), February 10, 2017. Suppose you purchase the May 2017 put option on corn futures with a strike price of $3.80. Assume your purchase was at the last price. Use Table 23.2 a. How much does your option cost per bushel of corn? (Round your answer to 5 decimal places, e.g., 32.16161.) b. What is the total cost for one contract? Assume each contract is for 5,000 bushels. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. Suppose the price of corn futures is $3.58 per bushel at expiration of the option contract. What is your net profit or loss from this position? (Enter your answer as a positive value. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What is your net profit or loss if corn futures prices are $4.07 per bushel at expiration? (Enter your answer as a positive value. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) per bushel a. Option cost b. Total cost Profit d. Loss c. In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $420 million. The probability of loss is 1.41 percent in one year, and the relevant discount rate is 3.5 percent. a. What is the actuarially fair insurance premium? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar, e.g., 1,234,567.) b. Suppose that you can make modifications to the building that will reduce the probability of a loss to .85 percent. How much would you be willing to pay for these modifications? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar, e.g., 1,234,567.) a. Insurance premium b. Maximum cost TABLE 23.2 Sample CME Group Futures Options Price Quotations Prior H/LOW Charts Change LOW Underying Future May 2017 Updates 1638 CT 10 2017 3772 OTO 3570 3780 Type: American Options Expiration: May 2017 Strike Range: At The Money Calls Puts LOW Lt Volume stra Price Updated High Prior Sottle Change Low Last Last Pro Change Settle LOW High Volume Limi! Updated 231 274 237 257 5 3600 54 55 53 NO 591 Lt 00 10 F 2017 CT 10 FD 00 NO 163837 CT 10 235 3650 67 24 73 70 163854 CT 10 Feb No 1638.67 CT 10 Pro 702 203 91 55 197 3700 80 NO 917 Lt . 16 3800 CT 10 Feb 2017 NO 16.30:00 CT 10 F 2017 163 171 3750 103 117 103 107 NO 3.919 LIME 163000 CT 10 Feb 2017 NO 16.38:37 CT 10 Fe 2017 -51 45 NO 1000 Lt 16:3824 CT 10 Feo 3 00 NO 44 125 97 . 175 CT 10 2017 NO om 00 16 3800 CT 100 2017 09 16.30:47 No LIE! 00 186 110 84 61 1045 2900 re 207 No 183 LIM 00 10 Fee 2017 CT 10 FD 2017 NO NO 77 66 13 . . 163828 CT 10 2017 10 2017 00 NO 1638.68 CT 10 2017 230 75 13 282 - . NO 11 LIMI 16:38:41 CT 10 D 2017 ! 00 57 CT 10 FD 2017 22 NO Limit 00 16.39.00 CT 10 Feb 2017 00 About This epon Source: CME Group (www.cmegroup.com), February 10, 2017. Suppose you purchase the May 2017 put option on corn futures with a strike price of $3.80. Assume your purchase was at the last price. Use Table 23.2 a. How much does your option cost per bushel of corn? (Round your answer to 5 decimal places, e.g., 32.16161.) b. What is the total cost for one contract? Assume each contract is for 5,000 bushels. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. Suppose the price of corn futures is $3.58 per bushel at expiration of the option contract. What is your net profit or loss from this position? (Enter your answer as a positive value. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What is your net profit or loss if corn futures prices are $4.07 per bushel at expiration? (Enter your answer as a positive value. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) per bushel a. Option cost b. Total cost Profit d. Loss c. In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $420 million. The probability of loss is 1.41 percent in one year, and the relevant discount rate is 3.5 percent. a. What is the actuarially fair insurance premium? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar, e.g., 1,234,567.) b. Suppose that you can make modifications to the building that will reduce the probability of a loss to .85 percent. How much would you be willing to pay for these modifications? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar, e.g., 1,234,567.) a. Insurance premium b. Maximum cost