Posted: November 14th, 2015
(1) Calculate the futures price in each of the following cases. Assume that the interest ratesare continuously compounded rates.
- a) What is the 1-year $/Euro futures price given the following date:
S = $1.00/Euro
T = 3 months
r($) = 2%
r(Euro) = 4%
- b) What is the 1-year gold future price given the following date:
S = $1,200/oz
T = 6 months
r = 2%
- c) What is the 1-year Soyabean future price given the following date:
S = $8.6 /bushel
T = 3 months
r = 2%
Carrying cost = 0.05%
(2) Explain why expectations of future exchange rates do not have a role to play indetermining the futures price for the GBP/USD FX rate. (Note: This holds for all assets).
(3) Give two examples of how swaps are used. Describe the transactions.
(4) Describe the cash flows to a short futures contract. Give an example.
(5) In the Carrefour case, which bond should the firm issue? Explain in your words why?
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