Reference no: EM131325829
Referring to problem, suppose transaction costs amounted to 0.5 percent of the value of the stock index. Explain how these costs would affect the profitability and the incidence of index arbitrage. Then calculate the range of possible futures prices within which no arbitrage would take place.
Problem
Explain the impact on the implied repo rate of changing from the bid to the offer futures price of the longer dated futures contract ?
Assume that on December 2, 2010, the cheapest bond to deliver was the 6 1/4s maturing on August 15, 2028. The March contract is priced at 112, and the conversion factor is 1.0269. The June futures price is 111.75. The conversion factor for the 6 1/4s delivered on the June contract is 1.0265.
The accrued interest on the bond on March 7, the assumed delivery date, is 0.35, and the accrued interest on June 5 is 1.90. There are no coupons between the two futures expiration dates.
Calculate the implied repo rate for the March June 2011 Treasury bond futures spread. If the actual forward repo rate is 4 percent, what do you recommend?
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Analyze organizational culture as it relates to supervision
: Analyze organizational culture as it relates to the supervision of criminal justice entities. Officer James Armstrong, School Resource Officer at Riverside High School, has discovered spray painted graffiti on the concession stand of the school's f..
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Evaluate the soundness of the companys financial policies
: Evaluate the soundness of the company's financial policies (e.g. capital structure, debt, leverage, dividend policy, etc.) based on the material covered during class.
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Calculate the implied repo rate for the march june 2011
: Calculate the implied repo rate for the March June 2011 Treasury bond futures spread. If the actual forward repo rate is 4 percent, what do you recommend?
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Overvalued relative to purchasing power parity
: 1. Was the yen undervalued or overvalued relative to purchasing power parity? 2. Was the Swedish krona undervalued or overvalued relative to purchasing power parity?
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Calculate the implied repo rate for the march june 2011
: Calculate the implied repo rate for the March June 2011 Treasury bond futures spread. If the actual forward repo rate is 4 percent, what do you recommend?
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Discuss how growing diversity and technological changes
: Discuss how growing diversity and technological changes have impacted and will continue to impact these functions and the police force. Provide examples of how technological changes will impact criminal justice organizations in the future
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Compute your chosen firms gross profit margin
: Using the income statement you found, compute your chosen firm's gross profit margin, operating income margin, and net income margin (using the equations found in this module's instruction) for the past 3 years.
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Monopolist profit-maximizing price-quantiy and profits
: It is very expensive to do the research to invent a new drug, but the cost of producing the drug once it has been invented is only $1 per dose. Assume the inventor has a patent, which creates a monopoly. a) Draw a diagram showing the monopolist's p..
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Explain difference between a short hedge and a long hedge
: Explain the difference between a short hedge and a long hedge ?- What is the basis?- How is the basis expected to change over the life of a futures contract?
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