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FIN 620 Session 9 Homework Assignment Answers

# FIN 620 Session 9 Homework Assignment Answers - FIN 620...

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FIN 620 Session 9 Homework Assignment Answers: Session 9: Do problems 25-4, 25-8, and 25-16 25-4. When you purchase the contracts, the initial value is: Initial value = 10(100)(\$951) Initial value = \$951,000 At the end of the first day, the value of your account is: Day 1 account value = 10(100)(\$943) Day 1 account value = \$943,000 So, your cash flow is: Day 1 cash flow = \$943,000 – 951,000 Day 1 cash flow = –\$8,000 The day 2 account value is: Day 2 account value = 10(100)(\$946) Day 2 account value = \$946,000 So, your cash flow is: Day 2 cash flow = \$946,000 – 943,000 Day 2 cash flow = \$3,000

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The day 3 account value is: Day 3 account value = 10(100)(\$953) Day 3 account value = \$953,000 So, your cash flow is: Day 3 cash flow = \$953,000 – 946,000 Day 3 cash flow = \$7,000 The day 4 account value is: Day 4 account value = 10(100)(\$957) Day 4 account value = \$957,000 So, your cash flow is: Day 4 cash flow = \$957,000 – 953,000 Day 4 cash flow = \$4,000 You total profit for the transaction is: Profit = \$957,000 – 951,000 Profit = \$6,000
25-8. The duration of a portfolio of assets or liabilities is the weighted average of the duration of the

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FIN 620 Session 9 Homework Assignment Answers - FIN 620...

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