Part 5. The S&P 500 futures contract is on $250 times the price of the index...

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Part 5. The S&P 500 futures contract is on $250 times the price of the index and the current price of the futures index 2,973. Construct a hedge on a portfolio that is identical to the S&P 500 which is currently worth $150,000,000. The hedge position is for an individual who owns the portfolio. In addition, calculate what position would be needed to change the portfolio's (beta) to 0.5. Part 6. The current 3-months LIBOR is 3%. A company is planning to borrow 50,000,000 Eurodollars in 3 months. The current value of the 3-months Eurodollar futures is 97.2. Construct a hedge for the company and show what will their borrowing cost and the futures market cash flows be if LIBOR (1) stays the same, (2) increases to 4%, (3) decreases to 2.75%. Part 7. What are the differences between Forward and Futures contracts? Part 8. The current risk-free interest rate is 5%. A gold futures contract and a forward contract have a one-year delivery strike price of $1,250 per oz. The current price of gold is $1,200. If the price of gold in the spot market increases by $20 per oz, (1) calculate what will change in the value of a forward and futures contract be? What are the daily transactions in the forward and the futures as a result of the price of gold increase if any? Part 5. The S&P 500 futures contract is on $250 times the price of the index and the current price of the futures index 2,973. Construct a hedge on a portfolio that is identical to the S&P 500 which is currently worth $150,000,000. The hedge position is for an individual who owns the portfolio. In addition, calculate what position would be needed to change the portfolio's (beta) to 0.5. Part 6. The current 3-months LIBOR is 3%. A company is planning to borrow 50,000,000 Eurodollars in 3 months. The current value of the 3-months Eurodollar futures is 97.2. Construct a hedge for the company and show what will their borrowing cost and the futures market cash flows be if LIBOR (1) stays the same, (2) increases to 4%, (3) decreases to 2.75%. Part 7. What are the differences between Forward and Futures contracts? Part 8. The current risk-free interest rate is 5%. A gold futures contract and a forward contract have a one-year delivery strike price of $1,250 per oz. The current price of gold is $1,200. If the price of gold in the spot market increases by $20 per oz, (1) calculate what will change in the value of a forward and futures contract be? What are the daily transactions in the forward and the futures as a result of the price of gold increase if any?

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Part 5 To construct a hedge on a portfolio identical to the SP 500 which is currently worth 150000000 we can use the SP 500 futures contract Since the SP 500 futures contract is on 250 times the price ... View the full answer