Imagine American Airlines (AA) is concerned about fuel prices rising in the minimize price risk, AA enters an agreement with a swap dealer in which it will pay the swap dealer a fixed payment of $85/bbl on July 15th 2024, in exchange for a variable payment from that swap dealer in the future which will be the August 2024 futures price on July 15th of 2024. Imagine that on July 15th of 2024, the futures price is equal to $75/bbl and the cash price is $75/bbl. In this case, what would be the net price the AA pays for crude oil in $/bbl? Ignore transaction fees. Enter your answer as a number to two decimal places. That is, if you believe the net price paid for crude oil is $21.12/bbl, enter "21.12" as your answer.
Q: What is cryptcurrency
A: Cryptocurrency is a type of currency that exists only in digital or virtual form. It incorporates…
Q: PolarTech Inc. is considering producing a new widget. The production equipment, costing $12 million,…
A: 2. Calculate the cash flows:The cash flows include the initial investment, annual cash flows, and…
Q: The Sisyphean Company is planning on investing in a new project. This will involve the purchase of…
A:
Q: The stock of CM Punk, Inc. has earned annual returns of 5%, -2%, 8%, 12%, and 4% over the last five…
A: The given return values are for the previous 5 years and not for the whole population, that is, the…
Q: For the Restaurant Sales database,:(a) Obtain the Min and Max amount in sales(b) For each Bin shown…
A: The relationship between sales amounts and their related frequencies is shown in the following plot…
Q: Find the EAC for each of the following light bulbs:
A: Absolutely, I can help you calculate the Equivalent Annual Cost (EAC) for both incandescent and LED…
Q: None
A: Step 1: Given Value for Calculation Cash Flow for Year 0 = - $12,100Cash Flow for Year 1 = $3460Cash…
Q: Suppose that Mullen Co, a U.S.-based MNC, knows that it will need 200,000 pounds in one year in…
A: To plot the contingency graph for hedging the payable with a call option, we need to calculate the…
Q: Use the following information for Questions 6 to 10: A promissory note for $12,500 was written on…
A: Promissory note: It is a financial instrument that has been traded in the money market to allow the…
Q: Solve step by step using excel: Upon starting your new job after college, you've been confronted…
A: Step-by-Step using Excel to Analyze 401(k) Investment Options1. Setting Up the Spreadsheet:Create a…
Q: Assume that a firm has Sales of $25,000,000, total assets of $20,000,000, current assets of…
A: What is Additional Funds NeededAFN, or additional funds needed, refers to the additional finances…
Q: None
A: b. Required investment in net working capital for year 1:Change in NWC=(0.141−0.147)×X1−Y1c.…
Q: The internal rate of return (IRR) refers to the compound annual rate of return that a project…
A:
Q: A stock is expected to pay a year-end dividend of $2.00, i.e., D₁ = $2.00. The dividend is expected…
A: To answer:A contract's acceptance or rejection is contingent upon the discount rate that is applied…
Q: Schweser Satellites Inc. produces satellite earth stations that sell for $100,000 each. The firm's…
A: Dear student, below is the answer to your assignment: Part 2: Explanation:Step 1: Calculate the…
Q: Cheng Inc. is considering a capital budgeting project that has an expected return of 23% and a…
A: Step 1:We have to calculate the coefficient of variation.The formula of coefficient of…
Q: IRR A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7…
A: Step 1:We have to calculate the internal rate of return of the project.We will use the IRR function…
Q: F2
A:
Q: please give Step by Step Solution otherwise i give you DISLIKE !
A: The Capital Asset Pricing Model (CAPM) is a financial model used to estimate the expected return of…
Q: Q4. You are willing to buy a car which will cost you 20000 euros. A bank is willing to provides you…
A: In this scenario, you are considering two loan options from a bank to purchase a car costing 20,000…
Q: You deposit $10,000 today in a savings account that pays 5.5% interest, compounded annually. What is…
A: Future Value = Present Value*(1+Interest rate)^No. of periods Where,Present Value = $10,000Interest…
Q: 19 You run a regression for a stock's return on a market index and find the following Excel output:…
A: Step: 1 The R-Square value of the regression output indicates the proportion of the variance in the…
Q: Growth Option: Option Analysis Fethe's Funny Hats is considering selling trademarked, orange-haired…
A: Fethe's Funny Hats - Growth Option Analysisa. Expected NPV of the ProjectCash Flows:Initial…
Q: 30) General Mills bought September call options for wheat with an exercise price of $2.80 at a price…
A: Step 1: Determine the value of the call option.The call option will have a value if the market price…
Q: How many years would it take $50 to triple if it were invested in a bank that pays 3.8% per year?
A:
Q: Assume you purchase (at par) one 14-year bond with a 6.20 percent coupon and a $1,000 face value.…
A: Here's how to calculate the realized yield on the bond:1. Calculate Annual Coupon Payment:Coupon…
Q: Your Christmas ski vacation was great, but it unfortunately ran a bit over budget. All is not lost:…
A: Question A. To compute for the number of months to payoff manually, use the formula number of…
Q: Question 15 of 30 View Policies Current Attempt in Progress -/0.35 ⠀ Carla Vista Corporation is…
A: Step 1: The calculation of the NPV and The IRR AB1Equipment cost $ 1,856,000.00 2Cashflow $…
Q: Suppose a U.S. investor wishes to invest in a British firm currently selling for £34 per share. The…
A: Solution By StepsStep 1: Calculate the Number of Shares the Investor Can Buy With the current…
Q: Washington Co. and Vermont Co. have no domestic business. They have a similar dollar equivalent…
A: DETAILED ANALYSISSolution:First, we need to calculate the percentage change for each currency over…
Q: S14-15 Finding the WACC [LO3] You are given the following information for Lightning Power Company.…
A: The weighted average cost of capital (WACC) calculates a company's cost of capital, proportionately…
Q: 1. Since capital budgeting decisions involve the estimation of a project’s future cash flows and the…
A: Behavioral traits can significantly impact capital budgeting decisions, particularly in the…
Q: X tal assets of $5,000 and the following the coming year: Firm A Unlevered Economy Bad Average Good…
A: Step 1:To find the standard deviation of the new ROE distribution after the firm issues $2,000 of…
Q: Question 2 (10 Marks) (20 minutes) Sam has been a resident of Ottawa, Canada all of his life. He was…
A: Sam's Capital Gains/Losses for Canadian Tax ReturnTaxable Capital Gains:1967 Ford Cobra:Capital Gain…
Q: Tori just purchased some equipment that belongs in a 35% CCA class. The equipment cost $167,400.…
A: Given:Equipment cost (original UCC): $167,400CCA class: 35% (declining balance method)Year…
Q: You own $23,496 of Olympic Steel stock that has a beta of 3.08. You also own $16,020 of Rent - a -…
A: Step 1: Given Value for Calculation Value of Olympic Steel Stock = vos = $23,496Beta of Olympic…
Q: B (1) Calculate monthly returns of ABBV from APRIL 5, 2019, TO APRIL 5,2024 Current price of ABBV is…
A: Therefore, using the bootstrapping approach and the randomly sampled monthly returns, the estimated…
Q: Charlene is evaluating a capital budgeting project that should last for 4 years. The project…
A: Step 1: Calculate the depreciation expense for each year under the straight-line method:The…
Q: You borrowed $284,000 with an adjustable rate mortgage with a 30 year term.The initial period is 1…
A: Mortgage value284000Loan period in years30Margin2.50%Initial rate4%Index in second year2.50%Interest…
Q: During the year just ended, Anna Schultz's portfolio, which has a beta of 0.96, earned a return of…
A: The above answer can be explained as under - Treynor's measure can be calculated as - Treynor's…
Q: Exhibit: Deposit Expansion Stages New New New New Cumulative Checkable Required Excess Loans New…
A: The correct answer is $128.To arrive at this solution, we need to understand the concept of deposit…
Q: Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant and the…
A: Step 1: Calculate Annual Cash FlowsA. Annual RevenuesThe company will generate annual revenues of…
Q: You have been asked by the president of your company to evaluate the proposed acquisition of a new…
A: SOLUTION:Year 0:The initial outlay for the project is $50,000. This includes the cost of the truck,…
Q: Please Write Step by Step Solution Otherwise I give you DISLIKE !!
A: Step-by-Step Solution to Find NPV for Caspian Sea Drinks' Diet Drink:1. Calculate Annual Cash…
Q: Calculate the missing values. Express dollar values rounded to two decimal places and break-even…
A: We should find the missing valuesCase 1:Break even volume is the Sales Volume at which there is no…
Q: Intro A corporate bond has 2 years to maturity, a coupon rate of 8%, a face value of $1,000 and pays…
A: The objective of the question is to calculate the price of a corporate bond given its coupon rate,…
Q: Consider a bond with a coupon rate of 7%. The bond has a par value of $1,000, a current price of…
A: Step 1: Given Value for Calculation Coupon Rate = c = 7%Face Value = fv = $1000Current Price of Bond…
Q: Robinson Co. is interested in purchasing a new delivery vehicle so it can become a subcontractor…
A: Step-by-step analysis:The first step is to calculate the annual depreciation expense. The vehicle…
Q: If returns of S&P 500 stocks are normally distributed, what range of returns would you expect to see…
A: Step 1: Step 2: Step 3: Step 4:
Q: None
A:
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- (a) Suppose a trader takes a position on June 5th 2021, in one September 2021 EURO (EUR) future contract at USD1.3094/EUR. The trader holds the position until the last day of trading when the spot price is USD1.2939/EUR. This will be the final settlement price because of price convergence. The trader has EUR125,000 for this investment. (i) If the trader had a long position and he was a speculator, calculate his profit or loss for the position above. (ii) If the trader had a short position and he was a speculator, calculate his profit or loss for the position above. (iii) If the trader had a long position and he was a hedger, calculate his profit or loss for the position above. (iv) If the trader had a short position and he was a hedger, calculate his profit or loss for the position above. (b) Discuss factors that you would consider in evaluating the political risk associated before making FDI in a foreign country.Consider the following prices, volume and open interest for gold futures contracts. Contract size: 100 oz Price units: $/oz (a) What was the value of the contract that expires in February 2022 when the market closed? (b) Which futures contracts had a higher settle price on the previous trading day? (c) Would a speculator prefer to go short at the daily high price or the daily low price?(a) What is the difference between a “hedger” and “arbitrager?" (b)What is the difference between a “speculator” and an “arbitrager?” (c)Suppose that you observe today, June 16, 2021, that the spot price for corn is $5.74 per bushel and the January 2022 futures price is $5.95 per bushel. You expect corn will sell in January 2022 for a price of $6.50 per bushel. For you, the cost of storing corn per month is 3 cents per bushel. a. If you are a speculator, what do you do? _______________________ b. If you are an arbitrager, what do you do? _______________
- Using the quotations in Exhibit 7.3, note that the September 2016 Mexican peso futures contract has a price of $0.05481 per MXN. You believe the spot price in September will be $0.064 per MXN. Calculate your anticipated profits (or loss) measured in $ (keep one decimal), assuming you take a long position in three contracts (Note that the contract size of one MXN contract is MXN500,000 ). When you enter a positive number, it means a profit. If you enter a negative number, it means a loss. Additionally, please keep one decimal, eg., 1,500.4. There is no need to use currency symbol in this question since your balance is measured in US $.A trader takes a view that March KLSE CI futures which are currently trading at 1188.60 are about to enter a downtrend. Should the trader go long or short futures. Assuming the trader maintains their original position until expiry and the cash settlement price is 1185.40, what will be the profit or loss? The contract size is RM50 per contract.Assume that today the euro futures contracts with a September 15th delivery date are priced at $1.3680/€ . Suppose that you sold 15 contracts of the euro futures today. If, by September 15th the spot rate is $1.3260/€ , your total profit/loss on your position is (the euro futures contract size is €125,000). $78,750 loss $78,750 gain €78,750 loss €5,250 loss None of the abov
- June 2021 Mexican peso futures contract has a price of $0.05197 per MXN. You believe the spot price in June will be $0.05831 per MXN. MXN500,000 is the contract size of one MXN contract. Required: What speculative position would you enter into to attempt to profit from your beliefs? Calculate your anticipated profits, assuming you take a position in three contracts. What is the size of your profit (loss) if the futures price is indeed an unbiased predictor of the future spot price and this price materializes?The following table shows the futures price data today for Commodity X, and you purchased a futures contract today at the settlement price. (Contract size : 30,000 kg of Commodity X) Open High Low Settlement Change Open Interest Today $16.28 $16.33 $16.25 $16.29 $(0.02) 6,338 Calculate the total value of this futures contract. If the initial and maintenance margin requirements are 15% and 10% of the contract value respectively, calculate the amount of deposit required to execute this contract. If the prices of the commodity X in the next 3 trading days are : $16.27, $16.40 and $16.97, calculate the profit/loss per kilogram of commodity X, total value of the contract, and the mark-to-market settlement. If additional margin is required, indicate when it is necessary and the additional deposit amount.Suppose that, on 5 November 2020, you opened a short position in a two-year futures contract on the Tesla stock. The share price at the beginning of the contract was $146, and the initial futures price was equal to a theoretical two-year forward price. Assume the following: initial margin of 40% of the futures value, maintenance margin of 32% of the futures value, 3% flat interest rate, continuous compounding, no withdrawals of the excess margin. Next, suppose that, on 1 November 2022, the Tesla stock is priced at $228 per share, and it goes down by 1% daily over 2nd, 3rd and 4th November. Suppose further that, on 1 November 2022, you have received a margin call from your broker (this was your first margin call during this contract) and had to make an instant adjustment to your margin account. Your position in this contract is closed on 4 November 2022. How can you assess your overall profit or loss? Would your overall profit/loss from 1) change if, on 5 November 2020, you had…
- Suppose that, on 5 November 2020, you opened a short position in a two-year futures contract on the Tesla stock. The share price at the beginning of the contract was $146, and the initial futures price was equal to a theoretical two-year forward price. Assume the following: initial margin of 40% of the futures value, maintenance margin of 32% of the futures value, 3% flat interest rate, continuous compounding, no withdrawals of the excess margin. Next, suppose that, on 1 November 2022, the Tesla stock is priced at $228 per share, and it goes down by 1% daily over 2nd, 3rd and 4th November. Suppose further that, on 1 November 2022, you have received a margin call from your broker (this was your first margin call during this contract) and had to make an instant adjustment to your margin account. Calculate the value of your position in this contract at a close of each day between 1-4 November 2022. Show and explain each step of your derivations.Suppose that, on 5 November 2020, you opened a short position in a two-year futures contract on the Tesla stock. The share price at the beginning of the contract was $146, and the initial futures price was equal to a theoretical two-year forward price. Assume the following: initial margin of 40% of the futures value, maintenance margin of 32% of the futures value, 3% flat interest rate, continuous compounding, no withdrawals of the excess margin. Next, suppose that, on 1 November 2022, the Tesla stock is priced at $228 per share, and it goes down by 1% daily over 2nd, 3rd and 4th November. Suppose further that, on 1 November 2022, you have received a margin call from your broker (this was your first margin call during this contract) and had to make an instant adjustment to your margin account. Show how the balance on your margin account was changing over this period (i.e., 1-4 November 2022).Today is May 1. Your firm purchased $15,000,000 face value of 180 day commercial paper today for a price of $14,550,000. You will need to liquidate the position in 120 days and you believe interest rates may move against you in the meantime and you decide to use euro$ futures to hedge the position. a) How many futures contracts should you use to fully hedge and should you buy or sell the futures contracts today if the September euro$ futures quote is at 98.55 and the December euro$ futures quote is at 97.35? Should you use the September or the December contract? b) One hundred and twenty days later, at the end of August the commercial paper is priced at $14,800,000 and the futures price quote for the September euro$ futures quote is at 98.95 and the December euro$ futures quote is at 98.25. What is the total dollar gain or loss on your futures position? What is the percentage interest rate earned on the commercial paper investment expressed as an effective annual rate or EAR including…