FN450 Derivatives;Unit 4 Assignment;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 2,000*EXP(5*.08)= 2983.649395;b.;semi-annually 2,000*EXP(5*.04)=2442.805516;c.;continuously 2,000*EXP(5*.08)= 2983.649395;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.;400 * 90 = 36000;400 * 80 = 32000;36000 32000 -1600 -1600 =2400 Total profit;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.;20*EXP(-0.06*6/12) = 19.40891067;4. A stock trading at $60 is expected to pay one dividend of $3 six months from now. The riskfree rate is 4%.;a. Find the present value of the $3 dividend to be received six months from now.;3*EXP(-0.04*6/12) = 3.06060402;b. Find the price of a one-year forward on this stock.;(60-A1)*EXP(0.04*12) = 92.01830032;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.;1550*EXP((0.02-0.05)*9/12) = 1515.514418;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.;1.2709*EXP((-0.0475-0.0125)*6/12) = 1.23;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?;View Full Attachment;FN450 Unit 4 Assignment.docx Download Attachment;FN450 Derivatives;Unit 4 Assignment;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.
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