1. You are seeking for any arbitrage opportunity in June. The current market quotations are as...
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1. You are seeking for any arbitrage opportunity in June. The current market quotations are as follows. CPO spot price is currently RM1,950 per metric ton July FCPO contract is trading at RM2,000 August FCPO contract is trading at RM 1,972 September FCPO contract is trading at RM 1,983 CPO Storage cost is RM5 per month and risk-free rate is 4%. Assume 100 metric tons of CPO. a) Compute the fair value for the July, August, and September futures price. Then, show which of the three contracts is the best for implementing an arbitrage strategy, if there is any arbitrage opportunity. [12 marks] b) The spot prices of CPO in the next three months are listed below. Calculate the arbitrage profit if you used arbitrage strategy in part (a) of this question. [13 marks] CPO spot price at the end of July: RM1980 per metric ton CPO spot price at the end of August: RM1990 per metric ton CPO spot price at the end of September: RM1998 per metric ton 1. You are seeking for any arbitrage opportunity in June. The current market quotations are as follows. CPO spot price is currently RM1,950 per metric ton July FCPO contract is trading at RM2,000 August FCPO contract is trading at RM 1,972 September FCPO contract is trading at RM 1,983 CPO Storage cost is RM5 per month and risk-free rate is 4%. Assume 100 metric tons of CPO. a) Compute the fair value for the July, August, and September futures price. Then, show which of the three contracts is the best for implementing an arbitrage strategy, if there is any arbitrage opportunity. [12 marks] b) The spot prices of CPO in the next three months are listed below. Calculate the arbitrage profit if you used arbitrage strategy in part (a) of this question. [13 marks] CPO spot price at the end of July: RM1980 per metric ton CPO spot price at the end of August: RM1990 per metric ton CPO spot price at the end of September: RM1998 per metric ton
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Answer rating: 100% (QA)
a Fair Value of July FCPO contract Spot cost 100412 Storage Cost 19501003... View the full answer
Related Book For
Federal Taxation 2016 Comprehensive
ISBN: 9780134104379
29th edition
Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson
Posted Date:
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