Find the futures price

Assignment Help Financial Management
Reference no: EM131324122

Suppose there is a commodity in which the expected future spot price is $60.

To induce investors to buy futures contracts, a risk premium of $4 is required. To store the commodity for the life of the futures contract would cost $5.50. Find the futures price.

Reference no: EM131324122

Questions Cloud

Is the futures overpriced or underpriced : Assuming continuous compounding, suppose the risk-free rate is 5.96 percent, and the dividend yield on the index is 2.75 percent. Is the futures overpriced or underpriced?
Market because of severe adverse effects and several deaths : You read in the newspaper about a recently approved prescription drug that has suddenly been withdrawn from the market because of severe adverse effects and several deaths.
Calculate the pressure : For liquid Na, the 1 atm boiling temperature is 1150 K for a flat liquid-vapor interface, ΔHv = 101.3 kJ/mole and γ = 0.19 1/m2. If the liquid pressure is 1 atm, calculate (i) the pressure (in atm) inside a Na bubble with a radius of 1 μm and (ii) ..
Current accelerated rate of approval of a new drug : Give a drug example to support your position. Then, take a different position and support the current accelerated rate of approval of a new drug in the United States.
Find the futures price : To induce investors to buy futures contracts, a risk premium of $4 is required. To store the commodity for the life of the futures contract would cost $5.50. Find the futures price.
Income capitalization converts income to value equivalent : Small income properties are bought and sold only for their tangible amenities. Gross income multipliers normally increase with a decrease in the operating expense ratio. Rent for the manager's unit should be included in the rent forecast. Income capi..
What does it mean to say the files were randomly selected : What does it mean to say the files were randomly selected?How would the researcher randomly select files? In other words, what does the process look like?Would our probabilities and results be different if we used convenience sampling? Why or why not..
Determine whether interest rate parity holds : Assuming annual compounding, determine whether interest rate parity holds.- Assuming continuous compounding, determine whether interest rate parity holds and, if not, suggest a strategy.
Humans restore natural ecosystems : Should humans restore natural ecosystems disturbed by natural events, such as a hurricane or volcano? Why? What if a species is likely to go extinct if the ecosystem is not restored? What is an example?

Reviews

Write a Review

Financial Management Questions & Answers

  Growth rate in dividends forever-what is current share price

Lohn Corporation is expected to pay the following dividends over the next four years: $20, $16, $15, and $8.50. Afterward, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the stock is 1..

  The highest risk bond to an investor

The highest risk bond to an investor, looking at the bonds issued by one company, are ___ bonds. After a bond is sold, the going rate of interest increases. This will have the effect of ___ the present value of remaining interest payments, and _____ ..

  Annual sales of an energy saving device

It is estimated that the annual sales of an energy saving device will be 20,000 the first year and increase by 10,000 per year until 50,000 units are sold during the fourth year. The variable manufacturing cost per unit under proposal A is estimated ..

  What is the discount rate that should be set for the project

Bono is considering a project that will result in initial aftertax cash savings of $3.8 million at the end of the first year, and these savings will grow at a rate of 5 percent per year indefinitely. What is the discount rate that should be set for t..

  Blue water designs is preparing a bond offering

Blue water designs is preparing a bond offering with a 7% coupon rate and a face value of $1000. The bonds will be repaid in 5 years. The company plans to issue the bonds at par value me pay interest semi annually. Given a discount rate of 6%, what s..

  Public law and private law

1. What is law and why is it necessary? 2. Explain the difference between the following pairs:

  Calculate degrees of financial leverage-operating leverage

The Last Gasp Water Company sells water by the gallon for a price of $0.75. Fixed coasts for the company are $200,000 , and variable coasts are $0.40 per gallon . the company already has $2,000,000 of 10% bonds on its balance sheet. Calculate the deg..

  External sources to fund the expected growth

Suppose that Wind Em Corp. currently has the balance sheet shown below, and that sales for the year just ended were $7.2 million. The firm also has a profit margin of 30 percent, a retention ratio of 20 percent, and expects sales of $8.2 million next..

  Cash flow streams has the higher present value

Present Value and Multiple Cash Flows. Investment X offers to pay you $3,400 per year for nine years, whereas Investment Y offers to pay you $5,200 per year for five years. Which of these cash flow streams has the higher present value if the discount..

  Considering purchase of an automated molding machine

The management of Erion Corporation is considering the purchase of an automated molding machine that would cost $280,534, would have a useful life of 5 years, and would have no terminal (salvage) value. The automated molding machine would result in c..

  What is the estimated unlevered cost of equity

Hilltop Paving has a levered equity cost of capital of 14.92 percent. The debt-to-value ratio is .4, the tax rate is 34 percent, and the pretax cost of debt is 7.2 percent. What is the estimated unlevered cost of equity?

  Coupon bonds on the market with ten years left to maturity

The Timberlake-Jackson Wardrobe Co. has 11.6 percent coupon bonds on the market with ten years left to maturity. The bonds make annual payments.

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