Assume that you are the Chief Financial Officer of the mining company XYZ. Today is August...
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Assume that you are the Chief Financial Officer of the mining company XYZ. Today is August 2017. By checking the books, you predict a cash shortage in December 2017. You know that you can use 90-day bank bills to solve the cashflow crisis. You have the information on the 90 Day Bank Bills Futures as in below 90 Day Bank Bills (IR) Futures Prices are DELAYED by a minimum of 20 minutes. Expiry Ask Open Sep 17 98.2800 Dec 17 98.2400 98.1700 Mar 18 Bid Jun 18 Sep 18 Dec 18 98.2900 98.2500 98.1800 98.1000 98.0900 98.0200 97.9400 97.9500 98.0300 High 98.2800 98.2800 Low 98.2800 98.2800 98.2400 98.2400 98.1900 98.1900 98.1700 98.1700 98.1000 98.1200 98.1200 98.0900 98.0400 98.0400 98.0200 98.0200 97.9400 97.9500 97.9600 97.9600 98,2500 98.2600 Last Trade Last Trade Time 17/08/17 12:48 17/08/17 12:45 17/08/17 13:00 17/08/17 13:06 17/08/17 13:02 17/08/17 12:55 Change -0.01 -0.01 -0.02 -0.01 -0.01 1. Would you buy or sell 90-day bank bills to help the situation? (buy or sell) 2. At the same time, you fear that the price of the 90-day bills is going to fluctuate over the next three months. You have decided to use 90-day BAB futures to hedge this risk. In order to hedge, would you long or short 90-day BAB futures? (long or short) 3. Assume you need exactly 4 contracts to hedge your cash shortage. How much is the cash shortage? $ (keep 2 decimal points) 4. Let's assume that in December 2017, the spot price for 90-day BAB is quoted at 97.50. Assume that you close-out your futures position. What is the gain (loss) on this contract? $ (keep 2 decimal points, add negative "sign for loss) 5. How much will you raise in the spot market by selling forty 90-day bank bills? $ (keep 2 decimal points) 6. What is the net position in December 2017? (keep 2 decimal points) Assume that you are the Chief Financial Officer of the mining company XYZ. Today is August 2017. By checking the books, you predict a cash shortage in December 2017. You know that you can use 90-day bank bills to solve the cashflow crisis. You have the information on the 90 Day Bank Bills Futures as in below 90 Day Bank Bills (IR) Futures Prices are DELAYED by a minimum of 20 minutes. Expiry Ask Open Sep 17 98.2800 Dec 17 98.2400 98.1700 Mar 18 Bid Jun 18 Sep 18 Dec 18 98.2900 98.2500 98.1800 98.1000 98.0900 98.0200 97.9400 97.9500 98.0300 High 98.2800 98.2800 Low 98.2800 98.2800 98.2400 98.2400 98.1900 98.1900 98.1700 98.1700 98.1000 98.1200 98.1200 98.0900 98.0400 98.0400 98.0200 98.0200 97.9400 97.9500 97.9600 97.9600 98,2500 98.2600 Last Trade Last Trade Time 17/08/17 12:48 17/08/17 12:45 17/08/17 13:00 17/08/17 13:06 17/08/17 13:02 17/08/17 12:55 Change -0.01 -0.01 -0.02 -0.01 -0.01 1. Would you buy or sell 90-day bank bills to help the situation? (buy or sell) 2. At the same time, you fear that the price of the 90-day bills is going to fluctuate over the next three months. You have decided to use 90-day BAB futures to hedge this risk. In order to hedge, would you long or short 90-day BAB futures? (long or short) 3. Assume you need exactly 4 contracts to hedge your cash shortage. How much is the cash shortage? $ (keep 2 decimal points) 4. Let's assume that in December 2017, the spot price for 90-day BAB is quoted at 97.50. Assume that you close-out your futures position. What is the gain (loss) on this contract? $ (keep 2 decimal points, add negative "sign for loss) 5. How much will you raise in the spot market by selling forty 90-day bank bills? $ (keep 2 decimal points) 6. What is the net position in December 2017? (keep 2 decimal points)
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ANSWERS 1 To help the situation I would buy 90day bank bill... View the full answer
Related Book For
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Posted Date:
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