Reference no: EM133044188

Questions -

Q1. You are the manager of the Curzon House Investment Fund. On 12 July, you receive notice that the fund will be sold on 30 August. The fund comprises a diversified portfolio of listed Australian shares. It is currently valued at $21 million. You hedged this risk using September SPI 200 futures. On 12 July, the contract price of the September SPI 200 futures contract was 5421. To hedge against possible falls in the value of the portfolio, you would:

a) Buy 155 futures contracts.

b) Sell 155 futures contracts.

c) Buy 5719 futures contracts.

d) Buy 5319 futures contracts.

e) None of the above answers is correct.

Q2. Mandy James has today invested in a 180-day bank bill with a face value of $1 million, priced to yield 5.3 per cent per annum. Simultaneously she has sold a futures contract on a 90-day bank bill with a face value of $1 million. The futures contract will expire in 90 days' time from today. The futures price is 94.55. Mandy intends to settle the futures contract by delivery. Ignoring any effects from the mark-to-market rule, what is the yield (simple interest, in per cent per annum) Mandy will achieve on her investment?

a) 4.10%

b) 3.12%

c) 5.08%

d) 3.62%

e) None of the above answers is correct.