Explain the key differences between forwards and futures. The spot price of oil is currently $128....

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Explain the key differences between forwards and futures. The spot price of oil is currently $128. An oil exporter enters into a forward contract to sell 750,000 barrels in 9 months. Storage costs are $2 per barrel per year payable quarterly in advance. The risk- free rate is 3%. What is the forward price? (4) (5) After four months, the spot price of oil has dropped to $103. What is the value of the forward contract and the new forward price? (3) On March 2nd, a technology company sells 52 March 2022 Euro FX contracts (each contract is for 125,000 EUR) at an opening price of $1.1035, with an initial margin of $175,000. The maintenance margin is $90,000. The settlement prices for March 2nd, 3rd and 4th are $1.1156, $1.1230 and $1.0924 respectively. On March 5th, they close out the position at a price of $1.0872. Total commissions are $5,000. Show the daily cash flows in their margin account and calculate the profit or loss on the transaction. (8) Explain the key differences between forwards and futures. The spot price of oil is currently $128. An oil exporter enters into a forward contract to sell 750,000 barrels in 9 months. Storage costs are $2 per barrel per year payable quarterly in advance. The risk- free rate is 3%. What is the forward price? (4) (5) After four months, the spot price of oil has dropped to $103. What is the value of the forward contract and the new forward price? (3) On March 2nd, a technology company sells 52 March 2022 Euro FX contracts (each contract is for 125,000 EUR) at an opening price of $1.1035, with an initial margin of $175,000. The maintenance margin is $90,000. The settlement prices for March 2nd, 3rd and 4th are $1.1156, $1.1230 and $1.0924 respectively. On March 5th, they close out the position at a price of $1.0872. Total commissions are $5,000. Show the daily cash flows in their margin account and calculate the profit or loss on the transaction. (8)

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Answer 1 The key differences between forwards and futures are Forwards are contracts between two par... View the full answer