On 12/05/2007 the December 2007 fed funds contract settled at 95.755 and the fed funds target rate was 4.50%. What is the expected cash settlement price of the futures contract as expiration if the fed cut the fed funds rates by -50bps in December 2007; assuming that the fed would only make a single rate cut at their scheduled
The 30 day fed funds futures trade on the CBOT and can be used to gauge the markets expectations of future fed funds rates. The February 2006 contract settled at 95.500 on 10/31/2005. If you expected no fed funds changes during February 2006, what would you expect the average effective rate to be during February 2006? htt
A farmer enters into a short corn futures contract at a price of $2.80 per bushel. The spot price of corn drops to $2.65 when the contract expires and the farmer delivers her corn. If the farmer harvested 13,000 bushels of corn and had futures contracts on 10,000 bushels of corn, what are the farmer's net proceeds when corn
You invest $3000 a year for 3 years at 12% a)what is the value of your investment after one year b)what is the value of your investment after two years c)what is the value of your investment after three years
Describe stock index futures. How could they be used by a financial institution that is anticipating a jump in stock prices but does not yet have sufficient funds to purchase large amounts of stock? Explain why stock index futures may reflect investor expectations about the market more quickly than stock prices.
An accountant must be familiar with the concepts involved in determining earnings of a business entity. The amount of earnings reported for a business entity is dependent on the proper recognition, in general, of revenue and expense for a given time period. In some situations, costs are recognized as expenses at the time of prod
Let's say--your great great great grand father invested 10 dollars in the stock market (say about 200 years ago)--what would that be worth now? Note: You need to research and find out the historical average rate of return for the stock market.
What is the difference between present and future values? How would you use present and future value techniques in preparing a financial retirement plan? How would various required rates of return affect the decision? Explain your answer.
Compare and contrast extrapolation with the writing of scenarios as forecasting techniques. Why is creative thinking using scenarios, extrapolation, brainstorming, the Delphi technique or statistical modeling helpful in the strategic management process?
Worldwide travel service has made an investment in certain equipment that cost the company $307,100. The equipment is expected to generate cash inflows of $50,000 each year. How many years will the equipment have to be used in order to provide the company with a 14% return on its investment?
9. Following financial statement is for the current year. From the past, you know that 10% of fixed-rate mortgages prepay each year. You also estimate that 10% of checkable deposits and 20% of savings accounts are rate sensitive. Second National Bank Assets Liabilities Reserves $1,500,000 Checkable deposits $15,000
Spratt Company purchased T-bill futures contracts when the quoted price was 93.50. When this position was closed out, the quoted price was 94.75. Determine the profit or loss per contract, ignoring transaction costs.
The stock of Russell Index Corporation is currently selling for $530.88 per share. The risk-free rate is 1.35% per quarter and it will not change for at least next six months. Russell Index Corp has an ordinary dividend yield of .25% per quarter. Ignoring marking to market, what should be the futures price for the futures contra
I am working on setting up the following problem and would appreciate receiving assistance: The futures contract quote on 5,000 bushels of soybeans traded on the CBOT, Monday, December 31, 2001 was: Open: 423-3/4 ($4.2375/bushel) High: 424 ($4.24/bushel) Low: 419-1/2 ($4.1950/bushel) Settle: 421 ($4.21/bushel) You s
What is the Future Value, at the end of 17 years, of depositing $1,750 into a Mutual Fund today, assuming the fund is expected to earn 12% a year?
Please see attached file. Chapter 17 (1, 2, 5, & 11) 1. The open interest on a futures contract at any given time is the total number of outstanding: 1. Contracts. 2. Unhedged positions. 3. Clearinghouse positions. 4. Long and short positions. 2. In futures trading, the minimum level to which an equity posit
Jim Herman is the treasurer of the midsized corporation, Veblen International. The firm manufactures various plastic components used in the computer hardware industry. When the firm opened up, it initially did business in the Midwest region of the United States but now sells its components to customers in other countries. Mr. He
Futures- Hedging, crush, basis, normal backwardation,, contango, marked-to-market, open interest, volume of trade
1. A farmer anticipates having 50,000 bushels of wheat ready for harvest in September. What would be the implications of hedging by (a) selling 8 contracts (b) selling 10 contracts, and (c) selling 12 contracts of September wheat? 2. A soybean processor intends to acquire 350,000 bushels of beans in July, process them in
5. Suppose that Skandinaviska Ensilden Banken (SEB), the Swedish bank, funds itself with three‑month Eurodollar time deposits at LIBOR. Assume that Alfa Laval comes to SEB seeking a one‑year, fixed‑rate loan of $10 million, with interest to be paid quarterly. At the time of the loan disbursement, SEB raises thr
Mr. and Mrs. Bush wish to purchase a boat in 8 years when they retire. They are planning to purchase the boat using proceeds from the sale of their property which is currently worth $90,000 and its value is growing at 7 percent a year. The boat is currently worth $200,000 increasing at 5 percent per year. In addition to the v
5. Hedging with Futures. Explain how a U.S. corporation could hedge net receivables in euros with futures contracts. Explain how a U.S. corporation could hedge net payables in Japanese yen with futures contracts.
Short Position - Complete the following table for this short position on a Treasury bond futures contract.
Complete the following table for this short position on a Treasury bond futures contract. [Note: short position] Daily Settlement Assume that on Monday, August 11, you sell on Chicago Board of Trade September Treasury bond futures contract at the opening price of 100 27/32 (1.0084375 x $100,000 = $100,843.75). The initial
1) The contract for grain is $5,000 per bushel. You purchase a contract of corn at $4.40 per bushel with an initial margin requirement of 8% of the dollar value of the contract. The price goes up to $4.49 in one month. a. Calculate the percentage of gain based on price appreciation. b. Calculate the percentage of gain b
P3-4. Dixon Shuttleworth has been offered the choice of three retirement-planning investments. The first investment offers a 5 percent return for the first 5 years, a 10 percent return for the next 5 years, and a 20 percent return thereafter. The second investment offers 10 percent for the first 10 years and 15 percent thereafte
In your portfolio you have $1 million of 20 year, 8 5/8 percent bonds which are selling at 83.15 (or 83 15/32) against this position. Because you feel interest rates will rise you sell 10 bond futures at 81.15 (or 81 15/32) against this position. Two months later you decide to close your position. The bonds have fallen to 78 and
10 Multiple choice questions on derivatives: short hedge, basis, anticipatory hedge, spot, asset, underlying, futures, cross hedge, minimum variance hedge ratio, profit at expiration, profit on a hedge, bonds, optimal stock index futures hedge ratio, portfolio, beta, S&P 500 futures, multiplier, ordinary hedge, risk
Please see attached. 1. A short hedge is one in which a. the margin requirement is waived b. the futures price is lower than the spot price c. the hedger is short futures d. none are correct e. the hedger is short in the spot market 2. What happens to the basis through the contract's life? a. it init
Phoenix Motors wants to lock in the cost of 10,000 ounces of platinum to be used in next quarter's production of catalytic converters. It buys three-month futures contracts for 10,000 ounces at a price of $550 per ounce. a. Suppose the spot price of platinum falls to $525 in three months' time. Does Phoenix have a profit or loss on the futures contract? Has it locked in the cost of purchasing the platinum it needs?
Phoenix Motors wants to lock in the cost of 10,000 ounces of platinum to be used in next quarter's production of catalytic converters. It buys three-month futures contracts for 10,000 ounces at a price of $550 per ounce. a. Suppose the spot price of platinum falls to $525 in three months' time. Does Phoenix have a profit or lo
Suppose there is a financial asset, a bond ABC, which is the underlying asset for a futures contract with settlement six months from now. You know the following about this financial asset and the futures contract: -In the cash market ABC is selling for $80. -ABC pays $8 per year in two semi-annual payments of $4, and the n
When you think about the challenges facing the health care system, where will the healthcare organizations seek assistance in their future? Will they use a strategic management approach? Will they remain bureaucratic? Will they use a population ecology approach? Other approaches? Defend your choice.
A. The soybean contract has a trading unit of 5,000 bu. If you would like to hedge on 15,000bu, how many futures contracts should you buy or sell? b. The feeder cattle contract has a trading unit of 50,000 pounds. If you would like to hedge on 750,000 pounds, how many futures contracts should you buy or sell? c. The gold