• +44-190-022-0819
• +1-248-268-9041
• +61288800241

### SEARCH SOLUTION

##### Search your solution from list of 1000+ questions

28-08-2018

Product code: Marketing-AW489

Heir Canada Estate Planning has taken positions in the following three derivatives:

i. 10,000 forwards on the Euro at \$1.40 that mature in six months;

ii. A fixed-for-fixed currency swap with semi-annual payments, notional principals of 10,000 USD and 7,000 Euros, and nine months to maturity; and

iii. A \$100,000 FRA.

(a) Compute the overall value of this derivatives position to the nearest cent under the assumption that none of these derivatives are centrally-cleared,

(b) Compute the current basis of the forward contract. Explain the sign of your computed basis.

In-the-Black Barry is interested in a one-year interest rate swap with quarterly interest payments. Using your assigned values:

(a) Compute the fair fixed rate for the swap to the nearest basis point.

(b) Assume that three months have passed since you entered into the swap (at your computed fair fixed rate) and that the term structure of interest rates has not changed. Compute the value of the swap to the nearest dollar.

(c) Explain why the computed swap value is not zero even though interest rates did not change.

Mood Basics Market Timing is interested in options on the shares of Can Add Any Tire, which pays no dividends. For your assigned inputs:

(a) Compute the value of a nine-month American put on these shares to the nearest tenth of a cent using a three-period binomial tree.

(b) Would a four-period binomial tree price this American put more accurately? Explain your answer.

(c) Compute the value of a nine-month American call on these shares to the nearest tenth of a cent using the Black-Scholes model.

(d) Do your two computed option prices conform to put-call parity? Explain this result.

Notes:

• This assignment may be done individually or in a self-selected group of up to four students. No communication regarding the problem set is allowed between groups.
• If working in a group, your assignment ID is the lowest of your individual assignment numbers and you must use the input values that correspond to it in your analysis.
• A softcopy of your answers must be submitted to Turnitin.com by 2:00pm on November 18. Answers will be checked for plagiarism and must be submitted in character recognizable Word or PDF format (i.e., text images are not permitted). Your name(s) and your assignment ID must appear at the top of the first page. No credit will be given for assignments that are late or are done by more than four students. Only one submission per group is allowed.
• You MUST show your formulas and calculations to earn part-marks on numeric questions.

Derivative position of Forwards No. of Forwards:- 10,000 Spot Price S = 1.42 Current Forward rate F= 1.4

Related Questions in (Marketing Management)

13-01-2018

Solution: The Journal of Helene Berr and Rue Ordener, Rue Labat 2 evidences that prove the difficulty and destructiveness that the people had to face in those four years. As mentioned by Berr (2009, p.23), in h ...

18-01-2018

Solution: Employee communication highlights the sharing of ideas and information. In this competitive business world, information exchange is essential among employees to develop team performance effectively. m ...

18-01-2018

Solution: As per Section 1 of the Thirteenth year plan describes about China’s two key objectives that will be accomplished if the National People’s Congress or the standing committee of this party passes t ...

18-01-2018

Solution: (Feldman 2005) reference information extraction to be one of the weightiest pre-processing method that escalates the text mining potential significantly. Pre-processing is an essential part in informa ...

18-01-2018

18-01-2018

Solution: The pro forma income statement represents a trending statement that includes the probable net income value for the company considering the current growth and decline rates valid throughout the period ...

18-01-2018

Solution: Mode is defined as the value which occurs more frequently in the data set. The mode for non-business is 82 while for business is only 59. P value can be calculated from z table . As per z table p valu ...

18-01-2018

Solution: ABC assumes that there are different activities involved in different processes that cause costs andthe product, services, and customers are reasons for those activities. The UK customer segment is br ...

19-01-2018

Solution: Residual earnings valuation method is used to calculate the intrinsic value of the stock based on the expected residual income of the company in the coming years. The residual income is discounted bac ...

19-01-2018