fbe436 hw4 solution

Explain the procedure that the company will have to

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Unformatted text preview: s information what is the smallest $ price that JBC can lock in with certainty for its 50,000,000 SF debt? Explain the procedure that the company will have to follow to obtain this price. There are 2 alternatives: (1) Borrow $s, buy SF spot, put SF in a 100-day deposit which pays 50,000,000: 50,000,000 = SF49,180,331. Buy: SF 100 1 + 0.06 360 49,180,331SF Cost: = $19,672,132. 2.50SF / $ 100 ⎞ ⎛ Repay: $19,672,132⎜1 + 012 . ⎟ = $20,327,869. ⎝ 360 ⎠ (2) Buy SF forward: SF 50,000,000 = $20,283,976. 2.465SF / $ Alternative (2) is cheaper because it costs less at the time of payment, 100 days hence. 6 FBE 436 Answers to Problem Set #4 Problem #4.6: The near futures MXP contract (500,000 MXP) experiences the daily history shown below. If the initial margin is $2,293, and the maintenance margin is $1,376, calculate when and how much the holder experiences margin calls. Date Futures Prices 1-Nov 10.90000 2-Nov 10.93815 3-Nov 10.99284 6-Nov 10.92688 7-Nov 11.17274 8-Nov 11.28447 9-Nov 11.11520 10-Nov...
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