金融学视频课后答案英文ch

1、CHAPTER 14 - Forward and Futures MarketsEnd-of-Chapter Problems1. Explain why an investor might take an illiqui d position in a forward contract rather than using an exchange-traded futures contract?Solution: This is a simple tradeoff between contract customization and standardization. The exchange-

2、traded futures contract is liquid because the standardization of the contracts gives the market sufficient volume and depth to maintain high liquidity. Obviously if the investor is willing to sacrifice the liquidity it is either because it is not important, as would be the case if the investor plans

3、 to hold the position and consummate the forward contract, or because it has attractive specialized characteristics in the dimensions of maturity, size, etc.2. Explain inwhat is meant by a “speculator taking a short position in Australian dollar futures.”Solution: A speculator is an investor looking

4、 to profit from forecasts of future spot rates and is not investing in the futures market to hedge a position. A short position is a liability so the has agreed to sell the asset in question at the specified price in the future. If the asset is Australian dollars the position is to sell Australian d

5、ollars for another currency, perhaps the US dollar. Thus the short Australian dollar position is equivalent to a long US dollar position. Finally it is a futures contract rather than a forward contract so it has standardized features making it liquid, most likely traded actively on an exchange.3. Su

6、ppose you are the manager of a municipal electric company that buys electricity on the wholesale market and distibutes it to residential customers and charges by passing on the price of the electricity plus operating costs. Without a fixed-price supply contract, what futures market position could yo

7、u undertake to hedge the residents exposure to higher cooling bills this summer if an electricity shortage were to develop?Solution: You would want to take a long position in the futures market for electricity in effect locking in a price for your wholesales purchases. Thus if the spot price increas

8、es and you have to pay more to acquire the electricityyou will get a compensating profit on your futures contract. While this is a price hedge the problem is on the volume. You must meet your customers demand so you must forecast the demand in order to determine the amount to hedge in the futures ma

9、rket.4. Suppose you astributor of canola seed and you obser ve the spot price of canola to be $7.45 perbushel while the futures price for deli ver y one month from today is $7.60. Assu carrying cost, what woul d you do to hedge your price uncertainty?a $0.10 per bushelSolution: We see that F S + C.

10、If you short the futures contract, you can lock in a price for your seed at $7.60 per bushel.5. As a speculator obser ving the futures price for hogs to be deli vere d in six months you see a price of $14 per hundred weight while you belie ve the spot price for hogs will be $15 in six months. Expl a

11、in whatposition you should take and how much pr ofit you expect to make. What are the expected cash flows from this position?Solution: Your expectation is the spot price in six months will be more than what can be locked in through the futures market so you should go long in hog futures. Your expect

12、ation is that you will see the price of the futures contract rise as time passes and it fact increase by $1 at the end of six months. So you need only sell the futures contract and realize your cash flow and profit.Chapter 14 - 1Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.Fina

13、l EconomicsSolutions Manual6. You aealer in kryptonite and are contemplating a trade in a forward contract. You observe thatthe current spot price per ounce of kryptonite is $180.00, the forward price for deli ver y of one ounce of kryptonite in one year is $205.20, and annual carrying costs of the

14、metal are 4% of the current spot price.a. Can you infer the annual return on a riskless zero-coupon security implied by the Law of One Price?b. Can you describe a trading strategy that woul d generate arbitrage profits for you if the annual return on the riskless security is only 5% ? What would you

15、r arbitrage profit be, per ounce of kryptonite?Solution: By no arbitrage, we require that the riskless rate r satisfy:F0 = S0(1 + r + s)S0 := 180F0 := 205.2s := 4%-(-F0 + S0 + S0s)Solving for r:r :=r = 0.110%S0The implicit risk- ounce is 10%.rate that you can earn by buying kryptonite, storing it, a

16、nd selling it forward at $205.20 perb. If the riskless borrowing rate is 5%, you should borrow at that rate and invest in hedged kryptonite. If you borrow the $180 you will end up paying 5% interest and 4% carrying cost for a total cost of:180(1 + 4% + 5%) = 196.200Thus the profit per ounce will be

17、$9:205.2 - 196.2 = 9.0007. Infer the spot price of an ounce of gold if you obser ve the price of one ounce of gold for for ward deli very in three months is $435.00, the interest rate on a 91-day Treasury bill is 1% and the quarterly carryingcost as a percentage of the spot price is 0.2% .Solution:

18、Deduce from the futures price parity condition for gold that F = S0(1 + r + s) so that:F := 435r := 1%s := 0.2%FS0 :=S0 = 429.842= $429.841 + r + s8. Calculate the implicit cost of carrying an ounce of gold and the implied storage cost per ounce of gold if the current spot price of gold per ounce is

19、 $425.00, the forward price of an ounce of gold for deli very in 273 days is $460.00, the yield ove r 91 days on a zero-coupon Treasury bill is 2% and the term structure of interest rates is flat.rate is (1 + 2%)3 - 1 = 0.0612 6.12%. Therefore we have:Solution: Over 273 days, the riskF := S(1 + r +

20、s)root425(1 + 6.12% + s) - 460 , s = 0.02122.12% for 273 daysAPR3root 1 +- 1 - 2.12% , APR = 0.02812.81% per year is the implied storage cost4Chapter 14 - 2Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.Final EconomicsSolutions ManualThe implied cost of carry is:F - S = 35.000 fo

21、r 273 days35425As a percentage of the spot price:= 0.08248.24% for 273 daysAPR3root 1 +- 1 - 8.24% , APR = 0.107010.69% per year is the implied cost of carry49. The forward price for a share of stock to be delivered in 182 days is $410.00, whereas the current yield on a 91-day T-bill is 2% . If the

22、term structure of interest rates is flat, what spot price for the stock is implied by the Law of One Price?FSolution:F := 410r := 2%S :=S = 394.08(1 + r)210. On your first day of trading in Vietnamese forward contracts, you observe that the share price of Giap Industries is currently 54,000 dong whi

23、le the one-year forward price is 60,000 dong. If the yield on aone-year riskless security is fifteen percent, are arbitrage profits possible in this market? If not, explain why not. If so, de vise an appropriate trading strategy.Solution: Arbitrage profits would seem to be possible, since the no-arb

24、itrage forward price implied by these parameters is:S := 54000F := 60000r := 15%F := S(1 + r)F = 62100.000The forward contract is under-priced, relative to the no-arbitrage value. Consider taking a long position in the forward contract and simultaneously selling a share of Giap stock and buying a ri

25、skless bond with a face value equal to the observed forward price. The short sale of Giap stock would yield you 54,000 dong today. You use the forward contract to insure you can purchase the share in one-year tothe short position. Thus you need 60,000 dong in one year. The present value of the 60,00

26、0 dong is given by:60000= 52173.913dong1 + 15%Thus your 54,000 dong from the short sale is sufficient to set aside enough today for the long forward position in a year and you make a profit today of:54000 - 52173.913 = 1826.087dong11. Suppose the current spot price of a riskless zero-coupon bond wit

27、h one year to maturity is $94.34 per $100 of face value. If a non-di vi dend-paying stock is currently selling for $37.50 per share what isimplied about its forward price for deli ve ry in one year? Use the forward-spot price-parity relationship.100Solution:The riskless rate is:- 1 = 0.060 6%94.34Th

28、e forward share price should be:F := 37.5(1 + 6%)F = 39.750Chapter 14 - 3Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.Final EconomicsSolutions Manual12. Referring to the information from the pre vi ous problem (problem 11) suppose the actual forward priceof the stock for deli v

29、er y in one year is $40. What ar bitr age oppor tu from the strategy.exists? Demonstrate the cash flowsSolution: The forward price is too high meaning you can deliver the share in a year for less than $40. Thus you should borrow at the riskless rate to purchase a share today in the spot market an go

30、 short in the forward market obliging yourself to supply a share in a year and collect the forward contract price. Thus you must borrow $37.50 to by the share in the sport market. After a year you must repay the loan principal and interest:37.5(1 + 6%) = 39.750But when you supply the share toyour sh

31、ort forward positionyou will receive $40. Thus you make $0.25 per share.13. You observe that the one-year forward price of a share of stock in Kramer, Inc ., a New York tour-bus company and pur ve yor of fine clothing, is $45.00 while the spot price of a share is $41.00. If the riskless yield on a o

32、ne-year zero-coupon gover nment bond is 5% :a. What is the forward price implied by the Law of One Price?b. Can you de vise a trading strategy to generate arbitrage profits? How much would you earn per share?Solution:a. The no-arbitrage value of the forward price is 41(1 + 5%) = 43.050 = $43.05.b. T

33、he observed forward price is excessive. Consider short-selling a forward contract and taking a long position in a portfolio consisting of one stock and the sale of a zero-coupon bond with face value of $45. . Future liabilities for this position are zero, while the current cash inflow is $1.86.14. T

34、he share price of Schleifer and Associates, a final consultancy in Moscow, is currently 10,000roubles whereas the forward price for deli very of a share in 182 days is 11,000 rubles. If the yield on a riskless zero-coupon security with term to maturity of 182 days is 15% , infer the expected di vi d

35、end to be paid by Schleifer and Associates over the next six months.Solution: The implied dividend is given by:D := S(1 + r) - F 10000(1 + 15%) - 11000 = 500.000rubles15. Infer the yield on a 273-day, zero-coupon Japagovernme nt security if the spot price of a share ofnon-di vi dend-paying stock in

36、Mifune and Associates is 4,750 yen where as the forward price for deli ve ry of a share in 273 days is 5,000 yen.5000Solution:- 1 = 0.05265.26% is the implied yield over the 273 days475016. Suppose a risky non-di vi dend-paying stock is currently priced at $45 per share. If the stocks risk premium i

37、s 5% and the riskless rate is 5% what is the expected spot price of the share one yearhence? What does the forward-s pot price-parity relation imply about the forward price of the share for delivery one year hence?Solution: The stock must be priced so the expected return is 10%. With a current price

38、 of $45 per share this implies an expected spot price in one year equal to: 45(1 + 10%) = 49.500 = $49.50. But by forward-spot price parity we have a forward price of: 45(1 + 5%) = 47.250 = $47.25. Thus the forward price is not the expected future price.17. Refer to problems 11 and 12. How woul d yo

39、ur ans wers change if the stock is expected to pay a $1di vi dend at the end of the coyear?Solution:S := 37.50r := 6%D := 1Chapter 14 - 4Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.Final EconomicsSolutions ManualThe implied forward price is:F := S(1 + r) - DF = 38.750The forwa

40、rd price of $40 is too high meaning you can deliver the share in a year for less than $40. Thus you should borrow at the riskless rate to purchase a share today in the spot market an go short in the forward market obliging yourself to supply a share in a year and collect the forward contract price.

41、Thus you must borrow $37.50 to by the share in the sport market. After a year you must repay the loan principal and interest:37.5(1 + 6%) = 39.750But when you supply the share ex-dividend toyour short forwardposition you will receive $40. Thus you make $1.25 per share.18. Suppose that the Treasury y

42、ield cur ve is flat at an interest rate of 7% per year (compounded semiannuall y).a. What is the spot price of a 30-ye ar Tre asury bond with an 8% coupon rate assu semiannuall y?b. What is the forward price of the bond for deli ve ry six months from now?Solution:coupons are pai da. The spot price o

43、f the 30-year Treasury is $112.47:Price(8% , 7% , 30) = 112.4724 per $100 of face valueb. The forward price for delivery six months from now should be $112.41F := S(1 + r) - C112.47241.035 - 4 = 112.40919. Continuing the pre vi ous probl em (proble m 18) show that if the for ward price is $1 less th

44、an theans wer found in problem 18, part b, the there is an arbitrage opportu.the proceedure by whichyou would produce an arbitrage profit and calculate the magnitude of the profit.Solution: If the forward price is only $111.41 then arbitrage profits can be it forward at the low forward price.by sell

45、ing the bond short and buyingSell short a bond at $112.47; buy it forward at $111.41; invest the proceeds of the short sale to earn 3.5% for 6 months yielding in six months 112.47241.035 = 116.409After 6 months, buy the bond at the forward price of 111.41. Use the bond to cover your short sale and p

46、ay the coupon of $4 yielding a profit of 116.41 - 111.41 - 4 = 1.000 = $1. This is the one dollar profit from the one dollar forward mispricing of the bond.20. A stock has a spot price of $100; the riskless interest rate is 7% per year (compounded annually), and the expected di vi dend on the stock

47、is $3, to be receive d a year from now.a. What shoul d be the one-ye ar futures price?b. If the futures price is $1 higher than the ans wer found in part a, what might that imply about the expected di vi dend?Solution: a.S := 100 r := 7%D := 3F := S(1 + r) - DF = 104.000b. If F is $105, that would i

48、mply a D of:rootS(1 + r) - D - 105 , D = 2.000Chapter 14 - 5Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.Final EconomicsSolutions Manual21. The spot rate of exchange of yen for Canadian dollars is currently 113 yen per dollar but the one-year forward rate is 110 yen per dollar.

49、 Determine the yield on a one-year zero-coupon Canadian gover nmentsecurity if the corresponding yield on a Japagover nment security is 2.21% .S := 113- 1Solution: The spot rate of exchange of Canadian dollars for yen is:S = 0.00885F := 110- 1 F = 0.00909rj := 2.21%The one-year forward rate is:The J

50、apariskless rate is:F (1 + rc) = (1 + rj)The interest rate parity condition is given by:SFrc :=(1 + rj) - 1Solving for rc:rc = 0.049985% is the Canadian riskless rate.S22. Assume the current spot price of the South African rand is $0.0995 and the one-year forward priceis $0.0997. If the riskless ann

51、ual dollar interest rate is 5% what is the implied riskless annual rand interest rate?Solution: The spot rate of exchange of dollars for rand is:S := 0.0995The one-year forward rate is:F := 0.0997The US riskless rate is:rus := 5%F (1 + rus) = (1 + rsa)The interest rate parity condition is given by:S

52、Frsa :=(1 + rus) - 1rsa = 0.052115.21%Solving for rsa:is the South African riskless rate.S23. Challenge Problem: Suppose that you are planning a trip to England. The trip is a year from now, anda hotel room in London at a price of 50 per day. You do not have to pay for the room inyou haveadvance. Th

53、e exchange rate is currently $1.50 to the pound sterling.a.b.c.Explain sever al possible ways that you could compl etely hedge the exchange rate risk in this situation. Suppose that ruk=.12 and rus =.08. Because S=$1.50, what must the forward price of the pound be?Show that if F is $0.10 higher than

54、 in your ans wer to part b, there woul d be an arbitrage opportu.Solution: a. This is a payable in pounds which can be completely hedged via a prepayment, a forward hedge, or a money market hedge. The prepayment simply means you exchange dollars for pounds today at the sport rate and pay the 50 bill

55、 in advance. The forward hedge means signing a forward contract to lock in an exchange rate in a year.The money market hedge means converting dollars to pounds at the current spot rate to invest the present value of the50 in a pound-denominated riskless asset.b. With ruk := 12% and rus := 8%. Since

56、S := 1.5 the forward rate implied by Interest Rate Parity is given by:1 + rusF := SF = 1.44641 + rukChapter 14 - 6Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.Final EconomicsSolutions Manualc. Consider borrowing dollars to convert spot and invest in a pound-denominated risk-ass

57、et for a year and alsosell the pound proceeds forward at the rate: F := 1.5464. The costs and revenue from this arbitrage would be:Cost(rus) = 1.08Revenue(S, F, ruk) := 1 (1 + ruk)FCost(rus) := 1 + rusRevenue(S, F, ruk) = 1.155SThe arbitrage opportuwould make a profit:Profit(S, F, rus, ruk) := Revenue(S, F, ruk) - Cost(rus)Profit(S, F, rus, ruk) = 0.074624. Challenge Problem: Suppose the one-year forward price of the dollar is K49.5 (Slovakian koruna) while t