Suppose on a certain day, Ammar notice the following quotes: RM1,250 per tonne CPO spot price...
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Suppose on a certain day, Ammar notice the following quotes: RM1,250 per tonne CPO spot price Risk free rate = 5% per year = RM10 per month = RM1,350 (3 months to maturity) Annual storage cost 3 month CPO futures Required: i. Determine whether arbitrage is possible. ii. Assume that the price of CPO at the maturity is RM1,010, calculate the possible profit if Ammar would like to invest in 50 tonnes. c. Interest rate swaps are exposed to many risks just like any other types of investments. Briefly explain THREE (3) of the risks inherent in an Interest rate swaps. Suppose on a certain day, Ammar notice the following quotes: RM1,250 per tonne CPO spot price Risk free rate = 5% per year = RM10 per month = RM1,350 (3 months to maturity) Annual storage cost 3 month CPO futures Required: i. Determine whether arbitrage is possible. ii. Assume that the price of CPO at the maturity is RM1,010, calculate the possible profit if Ammar would like to invest in 50 tonnes. c. Interest rate swaps are exposed to many risks just like any other types of investments. Briefly explain THREE (3) of the risks inherent in an Interest rate swaps.
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i To determine if arbitrage is possible we need to compare the cost of carrying 50 tonnes of CPO for ... View the full answer
Related Book For
Finite Mathematics and Its Applications
ISBN: 978-0134768632
12th edition
Authors: Larry J. Goldstein, David I. Schneider, Martha J. Siegel, Steven Hair
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