Investor A has received a 2-year loan with a fixed interest rate of 5%, while investor B has received a 3-year loan with a floating interest rate of Euribor+1%. The bank publishes the following swap rates:
 
                                  Purchase                      Sale

2 year swap                4%                              4,5%

3 year swap                4,2%                          4,7%

 

In which case are investors A and B prepared to enter into a swap contract with the bank?

 
Design the structure of an exchange agreement for A and calculate the final cost .

Design the structure of a swap agreement for the B investor and calculate the final cost.

 
2. Suppose that two calls options are traded in the market on a share that currently has a price of € 7. The first call option (A) has a strike price of €6.5 and a current price of €0.8. The second call option (B) has a strike price of €7.5 and a current price of €0.5. The two rights have a common expiration date. The investor takes a long position on option A and a short position on option B. What is the value of the investor's total position if the share price at the end of the strategy is €7.8. (multiplier 100) .

 
3. An investor holds a long position of 1000 shares of AAA company at a price of € 10 and buys a put option of AAA company at a strike price of € 10 and a premium of € 0.5. How can strategy be characterized, hedging or speculation, and why?

Answer rating: 100% (QA)

Answer 1 Investor A is not prepared to enter into a swap contract with the bank because the fixed in... View the full answer