User Account

All Pages

How many contracts should be shorted or bought

Assignment Help Finance Basics
Reference no: EM132601690

Assume we have the following information:

Spot price : 1146.00

Actual futures price : 1192.50

Theoretical futures price : 1160.00

Maturity : 3 months

a. Is the futures fairly priced?

Suppose an arbitrageur wish to take advantage of this opportunity. He has RM10,000,000.00 which he can fund at the current risk-free rate of 5%.

b. What should he do?

c. How many contracts should be shorted or bought?

d. Assume that the arbitrageur maintains this position until contract expiry at which time futures and cash prices have converged to 1165. How much profit would he makes?

Reference no: EM132601690

Questions Cloud

Determine the estimated premium expenses : Asus Corporation began a special promotion in July 2011, Determine the estimated Premium Expenses assuming that the actual redemption were incurred during 2011.
Determine the amounts Nichols would report : Determine the amounts Nichols would report in the financing section of the statement of cash flows. What is the Payment of cash dividends
What kind of ratios would want to see : If you were a manager at that company, what kind of ratios would you want to see? How do you think these ratios would help you in your decision-making?
Robotics and artificial intelligence serve : Robotics and artificial intelligence serve very different purposes. However, people often get them mixed up.
How many contracts should be shorted or bought : Assume we have the following information:
Prepare a schedule of cash payments : Wildhorse Company at December 31 has cash $23,200, noncash assets $100,000, liabilities $53,700, Prepare a schedule of cash payments
Complete the table indicating the split of the declared : Complete the table indicating the split of the declared dividends between common shareholders and preferred shareholders each year
Prepare journal entry to record declaration of cash dividend : Guildwood Corporation, Prepare the journal entries to record the declaration of the cash dividend, and the subsequent payment of the cash dividend
How your interviewee is significant for your study : As part of your public policy evaluation you are expected to interview a member of the community impacted by the policy or representatives of a community group.

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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