Todays settlement price on a chicago mercantile

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13) Today's settlement price on a Chicago Mercantile Exchange (CME) yen futures contract is $0.8011/¥100. Your margin account currently has a balance of $2,000. The next three days' settlement prices are $0.8057/¥100, $0.7996/¥100, and $0.7985/¥100. (The contractual size of one CME yen contract is ¥12,500,000). If you have a short position in one futures contract, the changes in the margin account from daily marking-to-market will result in the balance of the margin account after the third day to beA) $1,425.B) $2,000.C) $2,325.D) $3,425.Answer: CExplanation: $2,000 + ¥12,500,000 [(0.008011 – 0.008057) + (0.008057 – 0.007996) + (0.007996 – 0.007985)] = $2,325, where 0.008011 = $0.8011/¥100, 0.008057 = $0.8057//¥100, 0.007996 = $0.7996//¥100, and 0.007985 = $0.7985/¥100.Topic: Currency Futures Markets
14) Today's settlement price on a Chicago Mercantile Exchange (CME) yen futures contract is $0.8011/¥100. Your margin account currently has a balance of $2,000. The next three days' settlement prices are $0.8057/¥100, $0.7996/¥100, and $0.7985/¥100. (The contractual size of one CME yen contract is ¥12,500,000). If you have a long position in one futures contract, the changes in the margin account from daily marking-to-market, will result in the balance of the margin account after the third day to beA) $1,425.B) $1,675.C) $2,000.D) $3,425Answer: BExplanation: $2,000 + ¥12,500,000 [(0.008057 – 0.008011) + (0.007996 – 0.008057) + (0.007985 – 0.007996)] = $1,675, where 0.008057 = $0.8057//¥100, 0.008011 = $0.8011/¥100, 0.007996 = $0.7996//¥100, and 0.007985 = $0.7985/¥100.Topic: Currency Futures Markets15) Suppose the futures price is below the price predicted by IRP. What steps would assure an arbitrage profit?A) Go short in the spot market, go long in the futures contract.B) Go long in the spot market, go short in the futures contract.C) Go short in the spot market, go short in the futures contract.D) Go long in the spot market, go long in the futures contract.Answer: ATopic: Currency Futures Markets16) What paradigm is used to define the futures price?A) IRPB) Hedge RatioC) Black ScholesD) Risk Neutral ValuationAnswer: ATopic: Currency Futures MarketsAccessibility: Keyboard Navigation
17) Suppose you observe the following one-year interest rates, spot exchange rates and futures prices. Futures contracts are available on €10,000. How much risk-free arbitrage profit could youmake on one contract at maturity from this mispricing?Exchange RateInterest RateAPRS0($/€)$1.45 = €1.00i$4%F360($/€)$1.48 = €1.00i3%A) $159.22B) $153.10C) $439.42D) none of the optionsAnswer: AExplanation: The futures price of $1.48/€ is above the IRP futures price of $1.4641/€, so we want to sell (i.e. take a short position in one futures contract on €10,000, agreeing to sell €10,000in one year for $14,800).Profit = $159.2233 = €10,000 × To hedge, we borrow $14,077.67 today at 4 percent, convert to euro at the spot rate of $1.45/€, invest at 3 percent. At maturity, our investment matures and pays €10,000, which we sell for $14,800, and then we repay our dollar borrowing with $14,640.78. Our risk-free profit = $159.22= $14,800 – $14,640.78.Topic: Currency Futures Markets

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