Reference no: EM133060277

The silver futures is currently (June 2020) quoted at a spot price of $14 per ounce, and the risk-free rate is at 2.5%.

Questions:

a) What's the silver futures price (F) for December 2020 (six months from now) according to spot future parity?

b) Calculate the basis between these two futures.

Silver price today (June 2020) is $14 per ounce; the futures price for December 2020 is $14.5 per ounce. There are 5,000 ounces of silver in each futures contract. The margin requirement for each contract is $3500. You believe the price of silver will go up over the next six months. So you go long one future contract that expires December 2020. six months later, the silver future price goes up to $15.

Questions:

a) What's your long future position value six months later?

b) What's the current position value?b) What's your profit from the future trade?

c) What's % return on investment on this trade?

You like the near term prospect of ABC Company and decide to buy the stock call options. The current stock price is $53. You will buy 10 contracts with $54 strike price and it expires in nine months. The call premium for each share is $1. 6 months later, the stock price increases to $56,

Questions: a) What's the breakeven stock price for the call option?

b) What's the option intrinsic value?c) What's the option's payoff?

D) Draw an option pay-off diagram;

You have found the following information on a stock option: Stock price = $60; strike price = $65, Call price = $3. The option expires in 6 months, and the current risk-free rate is 3.1%. Calculate the option put price?