The spot price of a widget is $70.00 per unit. Forward prices for 3, 6, 9, and 12 months are $70.70, $71.41, $72.13, and $72.86. Assuming a 5% continuously compounded annual risk-free rate, what are the annualized lease rates for each maturity? Is this an example of contango or backwardation?
Answer to relevant QuestionsUsing Table 6.6, what is your best guess about the current price of gold per ounce? Suppose that copper costs $3.00 today and the continuously compounded lease rate for copper is 5%. The continuously compounded interest rate is 10%. The copper price in 1 year is uncertain and copper can be stored ...What is the rate on a synthetic FRA for a 90-day loan commencing on day 90? A 180-day loan commencing on day 90? A 270-day loan commencing on day 90? Consider the same facts as the previous problem, only nowconsider hedging with the 3-month Eurodollar futures. Suppose the Eurodollar futures contract that matures 60 days from today has a price on day 0 of 94. a. What ...Suppose you observe the following effective annual zero-coupon bond yields: 0.030 (1-year), 0.035 (2-year), 0.040 (3-year), 0.045 (4-year), 0.050 (5-year). For each maturity year compute the zero-coupon bond prices, ...
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