1. Assume a
firm has a portfolio that contains stocks that track the market index.
The firm now wants to change this portfolio to be 20% in commodities and
only 80% in the market index. How would the firm use derivatives to
implement this strategy?
2. Assume a firm
has a portfolio that contains stocks that track the market index. The
firm now wants to change this portfolio to be 20% in commodities and
only 80% in the market index. How would the firm use derivatives to
implement this strategy without using futures contracts?
3.
A firm enters into a long position in 10 silver futures contracts at a
futures price of $4.52/oz., and closes out the position at a price of
$4.46/oz. If one silver futures contract is for 5,000 ounces, what are
the investor’s gains or losses?
4. A firm enters
into a short futures position in 10 contracts in gold at a futures price
of $276.50 per oz. The size of one futures contract is 100 oz. The
initial margin per contract is $1,500, and the maintenance margin is
$1,100.
(a) What is the initial size of the margin account?
(b)
Suppose the futures settlement price on the first day is $278.00 per
oz. What is the new balance in the margin account? Does a margin call
occur? If so, assume that the account is topped back to its original
level.
(c) The futures settlement price on the second day is
$281.00 per oz. What is the new balance in the margin account? Does a
margin call occur? If so, assume that the account is topped back to its
original level.
(d) On the third day, the investor closes out the
short position at a futures price of $276.00. What is the final balance
in his margin account?
(e) Ignoring interest costs, what are his total gains or losses?
5.
The 181-day interest rate in the US is 4.50% and that on euros is 5%,
both quoted using the money-market convention. What is the 181-day
forward price of the euro in terms of the spot exchange rate S? Assume a
spot price of S euros per dollar.
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