20 1 21 nts Suppose that today is August 1. A corporate treasurer plans on buying...
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20 1 21 nts Suppose that today is August 1. A corporate treasurer plans on buying some long term corporate bonds in mid-November but she believes rates will likely move unfavorably between now and November. She wants to use futures to hedge her risk between now and November. Describe what contract type and maturity she should use to hedge and should she buy or sell the futures contract? 22 23 24 25 26 27 28 29 30 33 34 31 2 32 nts Suppose the price of oil as evidenced by the West Texas Intermediate futures price is $85.03 per barrel for July delivery of 1,000 barrels of oil, $83.12 per barrel for September delivery and $80.43 per barrel for December delivery. The current oil spot price is $86.73 per barrel. Is the oil market in backwardation or contango? Explain and explain why based on current market expectations. (The latter question will require a little bit of research into market conditions, please cite any sources.) What, if anything, do we learn about the expected future spot price of oil? Explain. 35 What is the minimum carry cost to prevent arbitrage between the spot price today and the September oil contract? 36 37 38 39 40 41 42 43 a) 44 45 46 47 b) 48 49 50 51 52 53 54 -- c) (Hint: For this ques 20 1 21 nts Suppose that today is August 1. A corporate treasurer plans on buying some long term corporate bonds in mid-November but she believes rates will likely move unfavorably between now and November. She wants to use futures to hedge her risk between now and November. Describe what contract type and maturity she should use to hedge and should she buy or sell the futures contract? 22 23 24 25 26 27 28 29 30 33 34 31 2 32 nts Suppose the price of oil as evidenced by the West Texas Intermediate futures price is $85.03 per barrel for July delivery of 1,000 barrels of oil, $83.12 per barrel for September delivery and $80.43 per barrel for December delivery. The current oil spot price is $86.73 per barrel. Is the oil market in backwardation or contango? Explain and explain why based on current market expectations. (The latter question will require a little bit of research into market conditions, please cite any sources.) What, if anything, do we learn about the expected future spot price of oil? Explain. 35 What is the minimum carry cost to prevent arbitrage between the spot price today and the September oil contract? 36 37 38 39 40 41 42 43 a) 44 45 46 47 b) 48 49 50 51 52 53 54 -- c) (Hint: For this ques
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