Determine the number of contacts

Assignment Help Finance Basics
Reference no: EM13862484

Problem 1: Your firm also believes that the US economy is going to prove stronger than many anticipate. However you also believe that the Federal Reserve is going to be slow to raise the federal funds target but later is going to be forced to raise the rate aggressively. Currently, the June 2016 Eurodollar futures (EDM) contract is pricing a 3-month Eurodollar rate of .545 percent and the June 2019 Eurodollar futures (EDM9) contract is pricing a 3-month Eurodollar rate of 1.95 percent. Your view is that market expectations will change in favor of your view over the next few months so you want to put on a spread trade in these contracts. You want to size your bet so that you make $1 million if the spread moves 20 basis points in your favor (and on the flip side are willing to lose $1 million if the spread moves 20 basis points against you). You want to set up your position so that if the spread does not change, you neither make nor lose money on the trade.

a. Determine the number of contacts for each instrument that you want to go long or short and indicate which instrument you are buying and shorting. Show calculations.

b. Verify that if the speared moves in your favor by 20 basis points you will make $1 million.

c. Verify that if the spread moves against you by 20 basis points you.

Reference no: EM13862484

Questions Cloud

Prepare journal entries in all funds journals-transactions : Prepare journal entries in all Funds journals and/or Activity journal for the related transactions provided. The following transactions occurred for the City of Fontaine’s General Fund. The budget prepared for the fiscal year included Total estimated..
Long-term loans are the only external debt arrangement : Adrian Lee is a recent AMME graduate. A few years ago he launched his new incorporated business, “Meter Marshall”. Adrian is a keen inventor and entrepreneur. Assuming that long-term loans are the only “external debt” arrangement, what is the gearing..
Determine the required mole fractions of the nitrogen : Determine the required mole fractions of the nitrogen and carbon dioxide to produce this mixture. From Chapter 17, the speed of sound is given by.
How the change in obtaining a competitive edge is reflected : how the change in obtaining a competitive edge is reflected in the change of organizational theory over the last century?
Determine the number of contacts : Determine the number of contacts for each instrument that you want to go long or short and indicate which instrument you are buying and shorting. Show calculations. Verify that if the speared moves in your favor by 20 basis points you will make $1 ..
Trial balance and the other information : The following are the trial balance and the other information related to Yorkis Perez, a consulting engineer. From the trial balance and other information given, prepare annual adjusting entries as of December 31, 2014. Prepare an income statement fo..
Discuss the signing of a lease prior to having the money : Discuss the signing of a lease prior to having the money. What was the risk? Discuss her fundraising and valuation. If you were an equity investor, what return expectations would you have?
What is the basis of the truck for determining?depreciation : Carrie owns a truck costing $13,000 and used for personal activities. The truck has a $9,900 FMV when it is transferred to her?business, which is operated as a sole proprietorship. What is the basis of the truck for determining?depreciation? What is ..
What problem do you believe is the most pressing : What problem do you believe is the most pressing, and why would you address that problem first? What are the expectations that you would share with the inmates and the guards about your plan

Reviews

Write a Review

Finance Basics Questions & Answers

  How much must you invest today

Suppose you are committed to owning a $190,000 Ferrari. If you believe your mutual fund can achieve a 12 percent annual rate of return and you want to buy the car in 9 years on the day you turn 30, how much must you invest today?

  What is the unpaid balance of the loan

Review the feedback that you received about your Individual Project from your instructor and colleagues and make any necessary revisions or improvements.

  Calculate interest payable annually

A 25-year bond, 2 years to maturity, paying a 11.45% coupon, and ytm of 12.5%. Interest payable annually, Interest payable semi-annually

  How much does he need to borrow to purchase the house

Bill Preston purchased a new home for $80,000. He paid $25,000 upfront and agreed to pay the rest over the next 15 years in 15 equal annual payments that include principal payments plus 8% compound interest on the unpaid balance.

  Calculate afn, when the company utilizes 100 % of capacity

a. Calculate AFN, when the company utilizes 100 % of capacity. b. Calculate AFN, when the company utilizes 85% of capacity.

  What is the best estimate of stock current market

Why are cash flows that are connected to common stock difficult to estimate? How does this compare to those related to bonds.

  Question on value of share

The Rufus Corporarion has 125 million shares outstanding and analyst expect Rufus to have earnings of $500 million this year. What is the value of a share of Rufus stock?

  Total cost recovery deduction be on the properties purchased

In May 2013, Preston purchases 5-year MACRS property costing $150,000 and 7-year MACRS property costing $140,000. Preston's income is $100,000. If Preston wishes to maximize his total 2013 cost recovery deduction,

  Fargo memorial hospital has annual patient service revenues

Fargo Memorial Hospital has annual patient service revenues of $14,400,000. It has two major third-party payers, and some of its patients are self-payers. The hospital's patient accounts manager estimates that 10 percent of the hospital's billings ar..

  Computation of the expected rate of return using capm

Computation of the expected rate of return using CAPM and What is the expected rate of return on the market portfolio

  Private-sector financial management techniques

Public school systems are not noted for providing student education at minimum cost.

  Calculate ebit on the department store order

Molly Jasper and her sister, Caitlin Peters, got into the novelties business almost by accident. Molly, a talented sculptor, often made little figurines as gifts for friends.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd