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homework1 - (19 10& 18 30 ± 1000 = 800 for 2006 and(20...

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1.6. (a) (0 : 50 ° 0 : 4820) ± 50000 = $900 : (b) (0 : 50 ° 0 : 5130) ± 50000 = ° $650 : 1.19. (a) (0 : 0080 ° 0 : 0074) ± 100000000 = $60000 : (b) (0 : 0080 ° 0 : 0091) ± 100000000 = ° $110000 : 1.24. Suppose it entered to buy at f 1 and sell at f 2 . Then the payo/ would be equal to ( f 2 ° f 1 ) ± 10000000 on January 1, 2006. 2.3. (5 : 20 ° F ) ± 5000 = ° 1000 = ) F = 5 : 40 : If you do not meet the margin call, the exchange can take possession of the balance of your margin account. 2.4. Total pro°t is (20 : 50 ° 18 : 30) ± 1000 = 2200 : It is realized in March 2007. (a) If you are a hedger, then we will use hedge accounting. You will be taxed in 2007 on a total pro°t of 2200 : (b) If you are a speculator, you will have to report taxes on
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Unformatted text preview: (19 : 10 & 18 : 30) ± 1000 = 800 for 2006, and (20 : 50 & 19 : 10) ± 1000 = 1400 for 2007. Using hedge accounting allows you to defer taxes on the &rst $800 of pro&t for one year. 2.11. ( F & 1 : 60) ± 15000 = & 1500 = ) F = 1 : 50 : A drop in the futures price of 10 cents will lead to a margin call. ( F & 1 : 60) ± 15000 = 1000 = ) F = 1 : 6667 : A price increase of 6.67 cents will generate a gain of $1000 per contract ($2000 in total), which can be taken out of the account. 1...
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