Question: Consider a short forward contract to sell a certain commodity for $55 in 2 years. Assume that current price is $58, with expected return 10%,

Consider a short forward contract to sell a certain commodity for $55 in 2 years. Assume that current price is $58, with expected return 10%, risk-free rate 3%, volatility 80%. What is the level of loss that will not be exceeded 95% of the time in 9 months?

a. 100.7 b. 92.8 c. 37.2 d. 24.5

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

1. The returns of two stocks were x n =0.02 and y n =0.07, their estimated daily volatilities were x,n =0.01 and y,n =0.05, and their estimated correlation was n =0.5. Assuming =0.94, what is the...

Consider a long forward contract to buy a certain commodity for $55 in 2 years. Assume the current spot price is S 0 =50, with expected return 5%, risk-free rate r=8%, volatility =40%. What is the...

Consider a long forward contract to buy a certain commodity for $55 in 2 years. Assume the current spot price is S 0 =50, with expected return 3%, risk-free rate r=4%, volatility =30%. What is the...

solve 3,4, and 5 PROBLEMS AND CASE STUDIES pe 1. PRACTICE PROBLEMS Consider an asset which is currently worth P1,000. An investor plans to sell it in one year. He is concerned that the price may have...

QUESTION 15 (a) Assume an options trader sells an XYZ call option, what position must she take in the stock to make her portfolio delta-neutral? (b) What position must she take in the stock and put...

I need a step by step solutions for the 10 problems in the excel file. The correct answers are provided I only need the solutions steps. Subject is Finance (options valuation) On March 2, a Treasury...

I need these problems worked out because I can't grab the concept , is their any possible way it can be done in 5 hours please! I never had to use this extra feature up until now so I was wondering...

Question 1 The six-month zero rate is 8% with semiannual compounding. The price of a one-year bond that provides a coupon of 6% per annum semiannually is 97. What is the one-year continuously...

Read the attachment carefully and please make a slides for the question. Marriott Corporation: The Cost of Capital The \"Marriott Corporation\" case explores how a company uses the capital asset...

The six-month zero rate is 8% with semiannual compounding. The price of a one-year bond that provides a coupon of 6% per annum semiannually is 97. What is the one-year continuously compounded zero...

Construct a stem-and-leaf display for the hours that 20 students spent studying for a marketing test. 3.5 2.8 4.5 6.2 4.8 2.3 2.6 3.9 4.4 5.5 5.2 6.7 3.0 24 5.0 3.6 2.9 1.0 28 3.6

Assume that you are the director of the inventory management department using a periodic review system in a hotel. Every Monday, you review the inventory and identify the needs of replenishment...

Holding all else equal, a loan with a longer term to maturity charges an interest rate that is q , compared to another loan with a shorter term ( e . g . , 3 0 years vs . 1 5 years ) .

Draw a class diagram and its relationship based on the following statements. You can use any UML tool/software to represent your class diagram. Do NOT copy and paste your diagram, use the attachment...