Assume that the risk-free rate has not changed

Assignment Help Financial Management

Reference no: EM13870614

On Oct 10, 2015, gold on the spot market is at $1,000 an ounce. A forward gold contract for delivery of gold on Oct 10, 2016 is priced at $1,030. Three months pass and spot gold is still at $1,000. What should be the approximate price of the Oct 10, 2016 forward contract now? Assume that the risk-free rate has not changed in the three months and that there are no storage and other costs.

a) 1,030

b) 1,022

c) 1,015

d) 1,000

Reference no: EM13870614

Questions Cloud

Pay fixed-receive floating swap with tenor : You have entered into a pay fixed/receive floating swap with a tenor of 10 years and standard conditions. How many payments can you calculate with certainty?

University today to make your dream reality : You dream of endowing a chair in finance at the local university that will provide the university with a cash flow of $150,000 per year FOREVER, with the first cash flow to be one year from today. If the university will be able to invest the money at..

What is the market risk premium : What is the Market Risk Premium (MRP)? Assume the following: Expected market return 9.62% (long-term US stock GAR), risk-free rate 2% (recent 10-yr Treasury yield).

Find the present value of the second perpetuity : The present value of an increasing perpetuity due with quarterly payments $100, $200, $300, etc. is three times the present value of a perpetuity immediate with level queerly payments $500. If both perpetuities use the same annual effective interest ..

Assume that the risk-free rate has not changed : On Oct 10, 2015, gold on the spot market is at $1,000 an ounce. A forward gold contract for delivery of gold on Oct 10, 2016 is priced at $1,030. Three months pass and spot gold is still at $1,000. What should be the approximate price of the Oct 10, ..

To hedge long position in put option you need : To hedge a long position in a put option you need to:

What can you do to reduce the portfolio total risk : You inherit a portfolio that is 50% invested in the SP500 and 50% in US Treasuries. The total risk of the portfolio is too high in your opinion. What can you do to reduce the portfolio total risk?

New index level be if all stocks on the DJIA increased : Assume that on a particular day, the DJIA opened at 11,960.09. The divisor at that time was .132550914. What would the new index level be if all stocks on the DJIA increased by $1.00 per share on the next day?

Bond valuation and changes in maturity and required returns : Suppose Hillard Manufacturing sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 10% coupon rate and semi annual interest payments. Two years after the bonds were issued the going rate of interest on bonds such as these fell to 6%...

User Account

All Pages