abhinav0131
New Member
Hi
Hoping for someone to clear some doubts for me please. Really appreciate it.
1> The spot price of corn on April 10 is 207 cents/bushels. The futures price of the September contract is 241.5 cents/bushels. If hedgers are net short, which of the following statements is most accurate concerning the expected spot price of corn in September?
Choose one answer.
a.) Exp spot price of corn is higher than 207.
b.) Exp spot price of corn is lower than 207.
c.) Exp spot price of corn is higher than 241.5.
d.) Exp spot price of corn is lower than 241.5.
Issue : Doesn't hedgers being net short mean they are short the futures ? Or hedgers are the corn producers ?
2> Consider the following. A 7-year, zero-coupon bond carries an annual yield of 6.75% and a 6-year zero-coupon bond carries an annual yield of 5.87%. Calculate the 1-year forward rate 6 years from now. Assume annual compounding.
Issue : If I use (6.75%*7-5.87%*6)/(7-6), answer is 12.03%, and if I use (1+6.75%)^7/(1+5.87%)^6, the answer is 12.19%. Unfortunately, both are in the options.
3> A 90-day Eurodollar futures contract has a constant PVBP of $25.00 per million. The 90-day bank bill futures contract on the Futures Exchange trades on a discount basis and the Price Value of a Basis Point (PVBP) is different for each yield level. In this example, what are the two major risks associated with using 90-day bank bill futures to hedge a Eurodollar futures position?
a. Basis Risk and Credit Risk
b. Basis risk and Currency Risk
Issue : How does this hedge have a currency risk ?
Thanks in advance!
Abhinav
Hoping for someone to clear some doubts for me please. Really appreciate it.
1> The spot price of corn on April 10 is 207 cents/bushels. The futures price of the September contract is 241.5 cents/bushels. If hedgers are net short, which of the following statements is most accurate concerning the expected spot price of corn in September?
Choose one answer.
a.) Exp spot price of corn is higher than 207.
b.) Exp spot price of corn is lower than 207.
c.) Exp spot price of corn is higher than 241.5.
d.) Exp spot price of corn is lower than 241.5.
Issue : Doesn't hedgers being net short mean they are short the futures ? Or hedgers are the corn producers ?
2> Consider the following. A 7-year, zero-coupon bond carries an annual yield of 6.75% and a 6-year zero-coupon bond carries an annual yield of 5.87%. Calculate the 1-year forward rate 6 years from now. Assume annual compounding.
Issue : If I use (6.75%*7-5.87%*6)/(7-6), answer is 12.03%, and if I use (1+6.75%)^7/(1+5.87%)^6, the answer is 12.19%. Unfortunately, both are in the options.
3> A 90-day Eurodollar futures contract has a constant PVBP of $25.00 per million. The 90-day bank bill futures contract on the Futures Exchange trades on a discount basis and the Price Value of a Basis Point (PVBP) is different for each yield level. In this example, what are the two major risks associated with using 90-day bank bill futures to hedge a Eurodollar futures position?
a. Basis Risk and Credit Risk
b. Basis risk and Currency Risk
Issue : How does this hedge have a currency risk ?
Thanks in advance!
Abhinav