What is the equilibrium price of gold futures

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Reference no: EM132987701

Question 1: You took a long position in 10 Eurodllar futures contracts (June 2023 delivery) on 1/13/2021 at the price indicated below. You met all margin calls, and did not withdraw any excess margin. All ED futures have a 90-day maturity and a notional principal of $1 million regardless of the delivery month. When the ED futures price increases by 1 basis point (98.35 to 98.36, for example), one long ED futures position gains $25, and one short ED futures position loses $25.

A. Complete table 1 and provide an explanation of any fund deposited.

B. How much is your total gain by the end of 1/21/2021?

Question 2: On May 10th, 2021, the gold spot price was $1,580/oz and the 9-month risk-free interest rate was 2% (annualized),
Assume the cost of storage and insurance of gold is $100/oz payable on February 7th, 2022. Use actual/actual day count method and simple interest method.

a) What is the equilibrium price of gold futures on May 10th, 2021 for delivery in 273 days, February 7th, 2022?

b) If the futures price is $1,800, how can you create an arbitrage profit making strategy? What is the amount of arbitrage profit?

Question 3: On Oct 5, 2021, you sold 10 Eurodollar futures contracts for Dec 2023 delivery at 98.995. You closed your position by buying 10 ED contracts at 99.015 on Jan 13, 2022. What is your gain or loss? One ED futures contract has a notional principal of $1 million with a 90-day maturity based on 30/360 day count method.

Question 4: The spot discount rates for two T-bills, 80-day T-bill and 170-day T-bill, are given below.

A) Based on the two T-bills's discount rates, what should be the quoted equilibrium price of an 80-day T-bill futures contract? Assume $1,000,000 face value. Keep in mind the quoted price is 100 - (discount rate). What should be the dollar amount implied by the futures quoted price (the amount to pay or to be paid at settlement)?

B) You took 10 long T-bill futures contact for delivery in 80 days. It is now 20 days later since you took the long futures position and the T-bill futures for delivery in 60 days is quoted at 95.50. Calculate your gains(losses) on your position.

Question 5: On September 10, 20X9, U.S. Treasury Bonds futures for Dec 20X9 delivery was traded at 116-20 at CBOT. On September 13, the futures was traded at 114-29. You opened your position by taking 10 long positions on the T-bond futures on Sept 10. As of Sept 10, the initial margin is $4,995 per contract and the maintenance margin is $3,700.
i) Calculate your gains (losses) on your position as of September 13.
ii) What is the highest price at which you will be required to deposit funds to your margin account (a margin call)?
iii) Would you have faced a margin call on September 13? If so, what is the amount to deposit?

Question 6: An investment management firm wishes to decrease the beta of one of its portfolios under management from 1.15 to 0.65 for a five-month period. The portfolio has a market value of $200,000,000. The investment firm plans to use a futures contract priced at $102,500 in order to adjust the portfolio beta. The futures contract has a beta of 1.02.
A) Calculate the number of futures contracts that should be bought or sold to achieve a decrease in the portfolio beta.The number of the contracts should be a whole number.
B) At the end of 5 months, the overall equity market is down by 3.5%. The stock portfolio under management is down by 4.025%. The futures contract is priced at $98,840.75. Calculate the value of the overall position and the effective (realized or ex post) beta of the portfolio.

Attachment:- Week Quiz.rar

Reference no: EM132987701

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