Risk Management 2 - per ton that you will have earned on...

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Old Exam Questions - Risk Management Page 2 of 2 Pages B. Bob pays the clearing house $220 and the clearing house pays Al $220 C. Al pays the clearing house $172 and the clearing house pays Bob $174.2 D. Bob pays the clearing house $174.2 and the clearing house pays Al $172 E. None, no payments are made until July 6. Assume that the current level of Standard & Poor's index is 250. The prospective dividend yield is 3.2%, and the interest rate is 7%. What is the value of a one-year future on the index? (Assume all dividend payments occur at the end of the year.) A. 230.7 B. 250.0 C. 259.5 D. 267.5 E. None of the above 7. Assume that in December the cash price for soybean meal is $150 per ton. You decide to hedge your expected June harvest by selling 1,000 July futures contracts at $160 per ton. Assume that in June, when you lift the hedge, the cash price is $165 per ton and the July futures are selling for $180 per ton. What will be the effective price
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Unformatted text preview: per ton that you will have earned on your crop? A. $135 B. $145 C. $155 D. $165 E. None of the above. 8. Assume that in April you knew that you would have $1,000,000 in August to invest in 90-day T-bills. At that time, 90-day cash T-bills had a yield of 1.60%, 120-day cash T-bills had a yield of 1.80% (a spread of +20 basis points), and the September 90-day T-bill futures contract had a yield of 2.30%. You decided to hedge by purchasing the September futures contract, knowing that you would take off the hedge in August and purchase 90-day cash T-bills. Assume that it is now August and the spread between 3-month and 4-month T-bills has changed to -15 basis points, such that 90-day cash T-bills have a yield of 2.50% and 120-day cash T-bills (as well as the September futures contract) have a yield of 2.35%. Based on this, determine your effective yield from this hedge. A. 2.60% B. 2.75% C. 2.45% D. 2.90% E. 2.30%...
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