Please see attached file for the questions

Anonymous
timer Asked: Dec 19th, 2018
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Please make sure you are able to answer the questions before you accept the work....... Please let me know if you have any question

1. ABC, Inc. plans to pay a dividend of $0.45 per share both 3 and 6 months from today. ABC’s share price today is $56.00 and the continuously compounded quarterly interest rate is 2.5%. What is the price of a 6-month prepaid forward contract, which expires immediately after the second dividend? 2. The current currency spot rate is $1.31 per euro. If dollar denominated interest rates are 3.0% and euro denominated interest rates are 4.0%, what is the likely dollar per euro exchange rate for a 2 year forward contract? (a) $1.28 (b) $1.30 (c) $1.31 (d) $1.33 3. The S&P 500 Index is priced at $950.46. The annualized dividend yield on the index is 1.40%. What is the price of a 6-month prepaid forward contract on the S & P 500 Index? (a) $943.83 (b) $950.00 (c) $964.26 (d) $984.21 4. XYZ, Inc. plans to pay a $1.60 dividend per share in 3 months and a $1.70 dividend in 6 months. XYZ’s share price today is $87.20 and the continuously compounded quarterly interest rate is .8%. What is the price of a forward contract, which expires immediately after the second dividend? 5. The S&P 500 Index is priced at $950.46. The annualized dividend yield on the index is 1.40%. The continuously compounded annual interest rate is 8.40%. What is the price of a forward contract that expires 9 months from today? (a) $937.48 (b) $942.66 (c) $984.36 (d) $1001.69 6. Which of the following statements does NOT accurately reflect the relationship between securities and synthetic forward contracts? (a) Forward = stock – zero coupon bond (b) Zero coupon bond = stock – forward (c) Prepaid forward = forward – zero coupon bond (d) Stock = forward + zero coupon bond 7. The S&P 500 Index price is $925.28 and its annualized dividend yield is 1.40%. LIBOR is 4.2%. How many futures contracts will you need to hedge a $25 million portfolio with a beta of 0.9 for one year? (a) 105 (b) 120 (c) 80 (d) 95 8. Interest rates on the U.S. dollar are 5.4% and euro rates are 4.6%. Given a dollar per euro spot rate of 0.918, what is the 6-month forward rate ($/E)? (a) 0.912 (b) 0.917 (c) 0.922 (d) 0.934 9. What is the process involved in creating a cash-and-carry strategy? 10. Name some advantages that futures contracts have over forward contracts. 11. Two months from today you plan to borrow $3 million for 3months at LIBOR. You hedge your interest rate risk with a euro dollar futures contract priced at 94.6. If settled in arrears, what is your payment if the 3-month LIBOR is 3.5% in two months? 12. Explain the process of creating a synthetic Forward. 13. The S&P 500 Index price is 1992.28 and its annualized dividend yield is 2.30%. LIBOR is .2%. What is the value of a prepaid forward and the forward contract? (Show your Work) 14. An investor wants to hold 200 euro two years from today. The spot exchange rate is $1.31 per euro. If the euro denominated annual interest rate is 3.0% what is the price of a currency prepaid forward? (a) $200 (b) $206 (c) $231 (d) $247 15. A stock is trading at $20 per share; and, does not pay a dividend. The annual rate of interest is 6%. What is the value of the one year prepaid forward? 16. A stock is trading at 20 dollars per share. The stock pays a $.25 quarterly dividend. The annual rate of interest is 6%. What is the value of a one year prepaid forward? 17. A company holding Australian dollars wishes to purchase UK Pounds. The current AUD/GBP (Australian Dollar/Swiss Franc) exchange rate is .4928. The rate on the 10 year bond (U.K.) is 1.89%. What is the value of a 3 year prepaid forward? 18. A company holding Australian dollars wishes to purchase UK Pounds. The current AUD/GBP (Australian Dollar/Swiss Franc) exchange rate is .4928. The rate on the 10 year bond (U.K.) is 1.79%. The rate on the 10 year AUD bond is 3.75%. What is the value of a 10 year forward? 19. A strategy consists of buying a market index product at $800 and longing a put on the index with a strike of $800. If the put premium is $32.00 and interest rates are 0.95% per month, what is the profit or loss at expiration (in 6 months) if the market index is $840? 20. The premium on a call option on the market index with an exercise price of 2010 is $19.70 when originally purchased. After 2 months the position is closed and the index spot price is 2072. If interest rates are 0.5 % per month, what is the Call Profit?

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Lessermaster
School: Duke University

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Anonymous
Good stuff. Would use again.

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