2013
-
Upload
jacklee1918 -
Category
Documents
-
view
2 -
download
0
description
Transcript of 2013
-
6
Part B
Family Name:.......SOLUTIONS.......... Q M Part 1 /50 Other Names:........................................................................ 21 /12.5 22 /12.5 Student Number:.................................................................. 23 /12.5 24 /12.5
Total
MURDOCH BUSINESS SCHOOL
BUS325 DERIVATIVE SECURITIES
IN-TERM TEST
FEBRUARY 2013
Time Allowed: One and one half hours.
Aids Allowed: To be supplied by Candidate: Calculator Attached to this paper: Formula Sheet
Format: This paper has two parts. Part A contains 20 multiple choice questions worth a total of 50 marks, and Part B contains 4 questions worth 12.5 marks each. Answer Part A on the answer sheet, and Part B on the question paper in the space provided. Show all calculations for Part B.
-
7
Part B Answer these questions on the question paper in the space provided.
21. Complete the table (below) of continuously compounded zero (spot) rates if the cash price of a bond that matures in exactly 18 months is $1,033.02. The bond has a face value of $1,000 and pays coupons semi-annually with a coupon rate of 8% p.a..
Maturity (months) Rate (% p.a.) 6
12 18 24
5.30 5.50
? 5.65
[12.5 marks]
0560.0)91943.0ln(5.1
1040/)21.81.7603.033,1(1040)9465.09738.0(4002.033,1
).40000,1(.40.4002.033,1).(..
3
3
5.1
5.1
5.11055.05.0053.0
.
3.
2.
1
3
3
3
332211
=
=
=
++=
+++=
+++=
r
r
e
e
eee
eFVCeCeCP
r
r
r
trtrtr
=> the eighteen-month spot rate is 5.60% p.a.
-
8
22. Suppose that it is February 23rd and the treasurer of an US firm realises that on August 23rd the firm will have to issue $3 million of commercial paper with a maturity of 180 days. If the paper were issued today, the firm would realise $2,892,000. September 91-day T-bill futures ($1million) are quoted at 92.00 on the CME. Describe the steps the treasurer should take to hedge the firms exposure?
[12.5 marks]
000,980)825.0100(000,10 ==F
902.525.0980000
5.02892000
=
=
=
F
S
DFDSN
February: Sell 6 September 90-day bank bill futures contracts
August: Buy 6 September 90-day bank bill futures contracts to close futures position, and issue (sell)
commercial paper with $3 million face value.
-
9
23. On December 21st 2012, Eve entered into a one-year long forward contract to buy 100 ounces of gold for USD1,700.00/oz. Three months later (March 21st, 2013), she observes that the spot price of gold was USD1,620.00/oz, what is the value of her position on this date? Assume the only carrying cost associated with gold is the interest rate, which remains unchanged at 10% p.a. (continuous compounded) for all maturities.
[12.5 marks]
84.42$.17001620
.
)(
75.01.00
000
+=
=
=
==
e
eKSfhence
eSFandeKFf
rT
rTrT
Since Eve had a long position, she has made a gain (agreed to buy at a price below the new equilibrium futures price).
(Loss)
-
10
24. The continuously compounded dividend yield on the SPI is 3.0% p.a. and the risk-free rate of interest is 1.3% p.a. with continuous compounding for all maturities. If the five-month S&P500 share price index (SPI) futures price is 1,600 points, what will be the no-arbitrage value of the two-month index futures contract?
[12.5 marks]
16071
.11600
.11600
))((12
25.0017.0
)122125)).(030.0013.0(
12
=
=
=
=
F
eF
eF
TTqreFF
______________________________________________
END OF PAPER
-
11
Formulae you may require:
TqreSF )(00
=
TyceSF )(00
=
))((12
12 TTqreFF =
rTeFKf = )( 0
T)rr(00
fheSF =
)1ln(m
RmR mC +=
nn trn
trtrtreFVCeCeCeCP ..3
.
2.
1 ).(...... 332211 +++++=
tnt
ttntntntt TT
TRTRR
=
+
+++
..
,
RateDiscount 360
100PriceCash = n
==F
Sh
FF
SS
DVDVN
=
F
S
VVN =
=
=
Bec
tDiyt
in
ii
1
yDBB =
________________________________