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One orange juice futures contract is on 10,000 pounds of frozen concentrate Suppose that in September 2018 a company sells a March 2020 orange juice futures contract for 110 cents per pound. In

One orange juice futures contract is on 10,000 pounds of frozen concentrate. Suppose that in September 2018 a company sells a March 2020 orange juice futures contract for 110 cents per pound. In December 2018, the futures price is 130 cents; in December 2019, it is 100 cents; and in February 2020, it is closed out at 115 cents. The company has a December year end. What is the company's profit or loss on the contract? How is it realized? What is the accounting and tax treatment of the transaction if the company is classified as (a) a hedger and (b) a speculator? s. The risk-free interest rate is 6% per annum with continuous compounding, and the dividend yield on a stock index is 4.2% per annum. The current value of the index is 110. What is the 6-month futures price? 6. In a perfect market, the expected payoff for which of the following is higher at the maturity? .. Going long in a 2-month forward contract on a non-dividend- paying stock with the current price of 50$ and expected price of 52$ at the maturity. b. Going short in a 2-month forward contract on a dividend-paying stock with the current price of 52$, the dividend yield of 8% per annum, and expected price of 51% at the maturity. Explain your answer with the required calculations considering that the risk-free rate is 10% per annum. 7. The 4-month interest rates in country A and the United States are, respectively, 2% and 5% per annum with continuous compounding. If the futures price for a contract deliverable in 4 months is $0.8040, calculate the spot price of the country A's currency in US dollar.

Apr 20 2021 View more View Less

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