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Hull, J. (2014). Fundamentals of futures and options markets (Eighth ed.). Upper Saddle River:

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Hull, J. (2014). Fundamentals of futures and options markets (Eighth ed.). Upper Saddle River: Pearson Education.;SHOW WORK for all problems in this assignment.;1. Find the future value of \$2,000 invested for five years at 8% if the interest is compounded;a. annually;b. semi-annually;c. continuously;2. In January, you sell short 400 shares of XYZ stock at a price of \$90. In February, the stock pays a dividend of \$4 per share. You close your position in March when the stock price is \$80.;a. What specific action is required to close your position in March?;b. Find your total profit or loss.;3. Find the price of a six-month forward on a stock trading for \$20 that pays no dividends, when the risk-free rate is 6%. For this problem and the rest of this assignment, you may assume that all interest rates are given as continuously compounded annual rates.;4. A stock trading at \$60 is expected to pay one dividend of \$3 six months from now. The risk-free rate is 4%.;a. Find the present value of the \$3 dividend to be received six months from now.;b. Find the price of a one-year forward on this stock.;5. A stock index with a dividend yield of 2% is currently valued at 1,550, The risk-free rate is 5%. Find the price of a nine-month forward on this stock index.;6. Suppose that the current exchange rate is \$1.2709 = ?1, the risk free rate in the U.S. is 1.25%, and the risk free rate in Europe is 4.75%. Find the price of a six-month forward for ?1.;7. Storing gold costs \$4 per ounce at the beginning of each year. The spot price of gold is \$1,360 and the risk-free rate is 3%. Find the price of a one-year futures contract for gold.;8. Suppose that a stock index with no dividends and a current price of \$1,000 is expected to gain 10% over the next year, while the risk-free rate is 3%. A one-year forward will be priced at \$1,030, while we expect the index to be at \$1,100 in one year.;a. Explain how we know that the one-year forward will be priced at \$1,030.;b. Explain why something expected to be worth \$1,100 is priced at \$1,030. In other words, what does the difference represent?;ISBN-13: 978-0-13-299334-0;Hull, J. (2014). Fundamentals of futures and options markets (Eighth ed.). Upper Saddle River: Pearson Education.

Paper#23771 | Written in 18-Jul-2015

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