Exam 5: Determination of Forward and Futures Prices

The spot price of Australian barley is AUD$240 per metric tonne, whereas the futures price of barley for delivery in nine months is AUD$252 per metric tonne. Suppose that storage costs are 8% per annum and the interest rates are 4% per annum for all maturities both rates are continuously compounded). Determine the convenience yield per annum continuously compounded) implied by the futures price. Answer as a per cent with two decimal places. ________

The spot price of an asset is positively correlated with the market. Which of the following would you expect to be true? choose one)

A short forward contract that was negotiated some time ago will expire in three months and has a delivery price of $40. The current forward price for a three-month forward contract is $42. The three-month risk-free interest rate with continuous compounding) is 8% per annum. What to the nearest cent) is the value of the short forward contract? _ _ _ _ _ _

Which of the following is a consumption asset? choose one)

Repeat question 2 on the assumption that the asset provides an income of $2 at the end of the first year and at the end of the second year. _ _ _ _ _

An exchange rate is 0.7000 and the six-month domestic and foreign risk-free interest rates are 5% and 7% per annum respectively both expressed with continuous compounding). What is the six-month forward rate? Give four decimal places. _ _ _ _ _ _

In question 2 what is the value to the nearest cent) of a three-year forward contract with a delivery price of $30? _ _ _ _ _ _

Which of the following is true? choose one)

The spot price of an investment asset that provides no income is $30, and the risk-free rate for all maturities with continuous compounding) is 10%. What to the nearest cent) is the three-year forward price? _ _ _ _ _ _

An investor shorts 100 shares when the share price is $50 and closes out the position six months later when the share price is $43. The shares pay a dividend of $3 per share during the six months. How much does the investor gain? _ _ _ _ _ _