1. Complete the following tables (the example from the course):We start with the assumption that the futures price is 100$ when the transaction opens, the initial marginrequirement is 5$, and the maintenance margin requirement is 3$.Table 1. Holder of long position of 10 contractsDayBeginningFundsSettlementFutures pricechange (5)Gain/Loss(6)Endingbalance (7)(1)balance (2)deposited (3) price (4)0100.0099.2096.00101.00103.50103.006104.00Table 2. Holder of short position of 10 contractsDayFundsSettlementBeginningbalance (2)Futures pricechange (5)Gain/Loss(6)Endingbalance (7)(1)deposited (3) price (4)0100.00199.20296.003101.004103.505103.006104.002. Suppose that an European call option on 1000 shares has the strike price 22 $/share and the premium 0.8$/share.a) What will be the buyer's payoff if the spot price at maturity is 23.1 $/share? Draw the diagram.b) What will be the seller's (writer) payoff if the spot price at maturity is 22.4 $/share? Draw the diagram.c) What will be the maximum loss for the option buyer and for the option seller?d) If the spot price at maturity is 19 $/share, the call option is ITM, ATM or OTM?e) For which value of the spot price the call option is ATM?3. Suppose that an European put option on 1000 shares has the strike price 9 $/share and the premium 0.5$/share.a) What will be the maximum loss and the maximum profit for the option buyer?b) What will be the seller's payoff if the spot price at maturity is 9.3 $/share? Draw the diagram.c) What will be the buyer's payoff if the spot price at maturity is 8.2 $/share? Draw the diagram.d) If the spot price at maturity is 8.7 $/share, the put option is ITM, ATM or OTM?e) For which value of the spot price the put option is ATM?12345

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Complete the table above for the holder of the short position. Day Beginning Balance Funds Deposited Settlement Price Futures Price Change Gain/Loss Ending Balance 0 0 5000 1 4960 2 4800 3 5050 4 5175 5 5200 6 5250.50 7 5310.75 2. How much are the total gains or losses by the end of day 7?
Suppose that a trader observes the rates provided in the following table. Based on these rates, IRP is and covered interest arbitrage is _ (Hint: Use the formal equation for IRP and round your calculations to 3 decimal places.) Ss/e 1.1655 F6.$/E 1.1690 6-month is 1.8% 6-month ie 1.5% Onot holding; not possible holding; possible not holding; possible holding; not possible
1)Demonstrate how a Margin Account operates for both the Long and the Short futures position using the following information (you do not need to adjust the values given for contract size or number of contracts): The initial margin is R30. The initial Futures price is R100. On Day 1 the price drops to R90. On Day 2 the price rises to R95. Fill in the correct monetary values for the margin account values (a) through to (f) in your answer booklet. Take care to show the signs (negative and positive) of your cash flows. LONG SHORT DAY 0 (a) (b) DAY 1 (c) (d) DAY 2 (e) (f)
24) Demonstrate how a Margin Account operates for both the Long and the Short futures position using the following information (you do not need to adjust the values given for contract size or number of contracts): • The initial margin is R30. • The initial Futures price is R100. On Day 1 the price drops to R90. • On Day 2 the price rises to R95. Fill in the correct monetary values for the margin account values (a) through to (f) in your answer booklet. Take care to show the signs (negative and positive) of your cash flows. LONG SHORT DAY O (a) (b) DAY 1 (c) (d) DAY 2 (e) (f)
5. Consider a futures contract in which the current futures price is 65$. The initial margin requirement is 5.4$/contract, and the maintenance margin requirement is 4$/contract. You go long on 30 contracts. You meet all margin calls and you withdraw 80$ at the end of the Day 1. Complete the mark-to-market process in the following table: Funds Beginning balance Ending Day deposited Futures price Price change Gain/Loss balance 65 68 2 66 69 3 5
Demonstrate howa Margin Account operates for both the Long and the Short futures position using the following information (vou do not need to adjust the values gtven for contract size or yumber of contracts): The initial margin is R30. • The initial Futures price is R100. • On Day 1 the price drops to R90. • On Day 2 the price rises to R95. Fill in the correct monetary values for the margin account values (a) through to (f) in your answer booklet. Take care to show the signs (negative and positive) of your cash flows. LONG | SHORT DAY 0 (а) (c) (e) (b) (d) (f) DAY 1 DAY 2
Demonstrate how a Margin Account operates for both the Long and the Short futures position using the following information (you do not need to adjust the values given for contract size or number of contracts): [6 marks] The initial margin is R30. The initial Futures price is R100. On Day 1 the price drops to R90. On Day 2 the price rises to R95. Fill in the correct monetary values for the margin account values (a) through to (f) in your answer booklet. Take care to show the signs (negative and positive) of your cash flows. LONG SHORT DAY 0 (a) (b) DAY 1 (c) (d) DAY 2 (e) (f) REQUIRED : (A) , (B) , (C) , (D) ,(E) ,(F)
Based on the information provided below, estimate the total profit or loss on a position: 1. Instrument traded: Futures Contract (London Metal Exchange) 2. Underlying metal: Nickel of 99.80% purity 3. Number of instruments traded: 130 4. Position taken: short 5. Quotation: USD per tonne 6. Lot size = 6 tonnes. %3D 7. Settlement type: physical 8. Futures price: 18782 9. Settlement price at the time of expiration: 18430
Demonstrate how a Margin Account operates for both the Long and the Short futures position using the following information (you do not need to adjust the values given for contract size or number of contracts): The initial margin is R30. The initial Futures price is R100. On Day 1 the price drops to R90. On Day 2 the price rises to R95.
(i) A forward contract with 12 months to maturity is written on an underlying stock. The stock price is $45, and it is expected to pay dividends of $2 after 6 months and $3 immediately prior to maturity. The relevant riskless rate of interest is 4%. Calculate the theoretical forward price and initial value of the forward contract and explain the forward pricing relationship. (ii) Provide a numerical example of an arbitrage strategy for situations where the forward is trading above, and below the theoretical forward price.
1. Strike = $60 Put = $8 / option Call = $10 / option Probable market values at maturity: 30, 40, 50, 60, 70, 80, 90. Size of contract: one share Required: a) Supposing that the market is on the rise and you are an options buyer, show the net results for each market value and graph them. b) Supposing that the market is on the rise and you are an options seller, show the net results for each market value and graph them. c) Supposing that the market is on the fall and you are an options buyer, show the net results for each market value and graph them. d) Supposing that the market is on the fall and you are an options seller, show the net results for each market value and graph them.
(Cost of Trade Credit) Calculate the effective cost of the following trade credit terms where payment is made on the net due date. 2/10, net 30 3/15, net 30 Common Stock A Common Stock B Probability Return Probability Return .30 11% .20 25% .40 15% .30 6% .30 19% .30 14% .20 22%

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