What is the equivalent rate with annual compounding

Reference no: EM133196872

Assignment - Finance and Business Worksheet - Futures and Options

Question 1 - It is July 16. A company has a portfolio of stocks worth $100$100 million. The beta of the portfolio is 1.2. The company would like to use the December futures contract on a stock index to change the beta of the portfolio to 0.5 during the period July 16 to November 16. The index futures price is 2,000, and each contract is on $250$250 times the index.

a. What position should the company take?

b. Suppose that the company changes its mind and decides to increase the beta of the portfolio from 1.2 to 1.5. What position in futures contracts should it take?

Question 2 - An interest rate is quoted as 5% per annum with semiannual compounding. What is the equivalent rate with (a) annual compounding, (b) monthly compounding, and (c) continuous compounding.

Question 3 - Shell Oil Refinery expects to pay for 100,000 barrel of crude oil at close of day on Friday, January 31. They want to hedge their position with crude oil futures. Assume that they enter into the position at close of day on Tuesday, January 28. The size of one crude oil futures is 1,000 barrel. Futures and spot data is provided in the file HW2_data.doc.

a. Describe the position they should enter (long or short, contract month).

b. Compute the hedge ratio using data from HW2_data.xls file.

c. How many contracts do they need to buy or sell?

d. Document the price gain or loss every day that their position is open.

e. What is the total cost after they have closed out their futures position, and made their payment?

f. What is the effective cost per barrel?

Attachment:- Data Files.rar

Reference no: EM133196872

Questions Cloud

Create a crosstabulation between lettergrade and newlocation : Create a crosstabulation between LetterGrade (DV) and NewLocation (IV). Provide an interpretation of the output.

Perform a range of programming tests : Provide a range of innovative IT services, namely: managed IT services, IT support, consulting and cyber security - perform a range of programming tests

Research on compliance and codes of ethics : Pick one of the following terms for your research: Compliance, codes of ethics, ethics officers, formal controls, or ethics audit

Which of dynamic growth-market-oriented reforms in russia : Which of the following periods is characterized by dynamic growth and market-oriented reforms in Russia? Boston University.

What is the equivalent rate with annual compounding : An interest rate is quoted as 5%5% per annum with semiannual compounding. What is the equivalent rate with (a) annual compounding

Manufacturing budget case study : Post Me assembles timber mailboxes which he sells to homeowners and builders for $48.00 each. Each mailbox requires the following:

Create substantial responses which expand on a point : Create substantial responses which expand on a point and present information on the topic.

Describing economic behaviors assessing both intended : Learn from history when defining / describing economic behaviors assessing both intended and un-intended consequences of public policy.

Major monotheistic religions of the world : Of the three major monotheistic religions of the world: Judaism, Christianity, and Islam: How do each impact and spread out from their original area of birth

User Account

All Pages