Question: QUESTION 23 A long 3-month forward contract is bought a barrel of crude oil when the delivery price is $240. The spot price of the

QUESTION 23 A long 3-month forward contract is bought a barrel

QUESTION 23 A long 3-month forward contract is bought a barrel of crude oil when the delivery price is $240. The spot price of the underlying crude oil is $239. If the continuously compounded 3-month risk- free rate of interest is 4.2% per annum, what is the value of the forward contract? O A. $0.51 O B. $1.51 O C. $0.23 O D. $1.27

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!

QUESTION 29 A long 3-month forward contract is bought on a barrel of crude oil when the delivery price is $50. The spot price of the underlying crude oil is $55. If the continuously compounded...

A long 3-month forward contract is bought on a barrel of crude oil when the delivery price is $50. The spot price of the underlying crude oil is $55. If the continuously compounded 3-month risk-free...

10 An investor is long a six-month forward contract on an asset with no known income. The delivery price is $25. The current price of the asset is $30 and the six-month risk-free rate is 10% pa....

5 . It is November 5 . A company has a portfolio of stocks worth $ 1 4 5 million. The beta of the portfolio is 1 . 7 2 . The company would like to use the CME December futures contract on the S&P 5 0...

Questions and Problems Assignment #1 2. XYZ stock is currently trading at a market price (s) of $11.45. Unless otherwise specified, you do not own the stock. Using Excel or drawing by hand, create a...

I have the below 5 questions in need of responses. I am willing to pay a generous wage provided it is done correctly. Question 1 Use the following futures quotes taken from NYMEX. The spot price of...

Suppose that it is January. You are a petroleum refiner. You want to hedge your production margin. For the sake of this problem, assume that for each barrel of crude oil that you buy in April, your...

8 . Suppose that the 3 - year and 3 . 5 - year zero rates with continuous compounding are 2 . 5 % and 2 . 5 5 % , respectively. ( a ) What is the forward rate for the six - month period beginning in...

1. (a) Explain the meaning of the following interest rate concepts (short explanation: 1. Spot-interest rate, 2p ii. Forward interest rate, 2p iii. Implicit forward interest rate, 2p iv....

Describe the concept of layers in a geographic information system.

Let T Exp(0.45). Find a. T b. 2T c. P(T > 3) d. The median of T

Real options are options based on an underlying real ( inflation - adjusted ) price rather than on a nominal price. Question 1 8 options: TrueFalse

A company is preparing completing their Cash Budget. The following data has been prepared for cash receipts and payments. January February March Cash receipts $1,061,200 $1,182,400 $1,091,700 Cash...