Assignment#4

Assignment#4 - 3-2 The loss in debt 1,000,000(0.0394...

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Assignment #4    (Nov. 21 th  2006) Cho, Gyu Ho

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1-1. (BDY*100)=100-(0.04×100) = 96  1-2. 10,000*[100*(1-BDY* n /360)]=10,000*[100*(1-0.04*90/360)]=990,000 1-3.  -The worth of long position=10,000*[100*(1-0.042*90/360)]=989,500   Thus, net gain: \$500(=990,000-989,500)  - BDY goes up by 20 bps, thus the net gain would be \$500(=20 bps*\$25) 2.  - Futures LIBOR=(100-92)/100=8%  -  The actual price per  contract=10,000*[100*(1-futures LIBOR ×   n /360)]=10,000  *[100*(1–0.08*90/360)]=980,000  The new price=10,000*[100*(1–0.07*90/360)]=982,500  Thus, the net gain would be \$2,500(=982,500-980,000)  - Compare to original futures LIBOR, LIBOR has gone down by 100 bps.  So, the net gain: \$2,500(=100 bps* \$25)  3. 1. Short one T-bill futures
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Unformatted text preview: 3-2.- The loss in debt 1,000,000*[(0.0394+0.01)–(0.035+0.01)]*(90/360)=1,100 - The gain from the futures contract =991,125-990,100 =1,025 *Oct. 15, 2003: Future price per contract=10,000*[100-(100-96.45)*90/360] =991,125 *Nov. 20, 2003: Future price per contract=10,000*[100-(100-96.04)*90/360] =990,100 So, lost \$75(=1,025-1,100) 4. * PVBP(portfolio) = \$8,000,000*10*0.0001=\$8,000 * 95-14 : 95 14/32*1,000=95,437.50 PVBP=\$95,437.50*8*0.0001= \$76.35 4.1. - PVBP(target)=\$8,000,000*15*0.0001=\$12,000 - # of contracts = (12,000-8,000)/(76.35*1.3)=40.30 contracts So, 41 futures contracts to long 4.2. - # of contracts would be 80.60 contracts(=8,000/(76.35*1.3)) So, 81 futures contracts to short...
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Assignment#4 - 3-2 The loss in debt 1,000,000(0.0394...

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