Describe a swap strategy that gt could employ with a swap

Assignment Help Finance Basics

Reference no: EM133616996

Problem

On NOV 22, 17 a Gold Trader (GT) entered several contracts as follows:

Contract 1: To purchase 100,000 ounces of gold from a Gold Mining Company (GMC) on MAR 14, 18 for the spot price on the purchase day.

Contract 2: To sell 100,000 ounces of gold on MAR 14, 18 to Gold Jewelry Designer (GJD). GT agrees with GJD that the selling price will be the current, NOV 22, 17, price of the NYMEX gold futures for APR 18 MINUS some discount. The discount is yet to be agreed upon between GT and GJD.

On NOV 22, 17 GT open a hedge on NYMEX to hedge the MAR 14, 18 spot trade with GMC using 1,000 NYMEX gold futures for delivery on APR 18. Each gold futures covers 100 ounces.

Use a time table to show all the cash flows associated with all the above contracts on NOV 22, 17 and on MAR 14, 18. Use our usual notations when prices are not given. On NOV 22, 17 the gold futures for delivery on APR 18 was trading for $1,502/ounce and the spot price was $1,491.30/ounce.

Describe a SWAP strategy that GT could employ with a swap dealer such that GT is guaranteed a profit of $600,000, while giving GJD a $4/ounce discount.

Reference no: EM133616996

Questions Cloud

Compare the geographic distance and the cage distance : Use the CAGE COMPARATOR to compare the geographic distance and the CAGE distance of Solomon Islands from Canada, considering the products and services of Dunkle

Do you think nelson roofings defamation claim : Do you think Nelson Roofings defamation claim would be successful? Please explain why or why not, including discussion of the elements of defamation

How does code of ethics promote professionalism : How does Code of Ethics promote professionalism in the real estate service industry? By encouraging continuous professional development

What allowed nations government to survive in those years : What allowed the nation's government to survive in those years? Write an essay on this topic that will be supported by strong arguments?

Describe a swap strategy that gt could employ with a swap : Describe a SWAP strategy that GT could employ with a swap dealer such that GT is guaranteed a profit of $600,000, while giving GJD a $4/ounce discount.

What should the cashier do : What should the cashier do if he suspects that a customer who is purchasing alcohol may be intoxicated? Sell the customer the alcohol

Should you do something : procurement travel cards for all his employees except Arnold, his only male employee, because he never travels for work. Arnold's work doesn't require travel.?

What is the true cost of building the new assembly line : Suppose company needs $18 million to build new assembly line. What is the true cost of building the new assembly line after taking flotation costs into account?

How would you solve the problem of disparities : How would you solve the problem of disparities in compensation for female partners in law firms and general counsel offices? I anticipate that you will use the

User Account

All Pages