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Category > Business & Finance Posted 29 Jul 2017 My Price 9.00

1. If the pension fund you manage expects to have an inflow of $120

1. If the pension fund you manage expects to have an inflow of $120 million six months from now, what  forward contract would you seek to enter into to lock in current interest rates?

2. If the portfolio you manage is holding $25 million of  8s of 2030 Canada bonds with a price of 110, what  forward contract would you enter into to hedge the interest-rate risk on these bonds over the coming  year?

3. If at the expiration date, the deliverable Canada bond is selling for 101 but the Canada bond futures contract is selling for 102, what will happen to the futures price? Explain your answer.

4. If you buy a $100 000 June Canada bond contract for 108 and the price of the deliverable Canada bond at the expiration date is 102, what is your profit or loss on the contract? 

5. Suppose that the pension you are managing is expecting an inflow of funds of $100 million next year and you want to make sure that you will earn the current interest rate of 8% when you invest the  incoming funds in long-term bonds. How would you use the futures market to do this? 6. How would you use the options market to accomplish  the same thing as in Problem 5? What are the advantages and disadvantages of using an options  contract rather than a futures contract?

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Status NEW Posted 29 Jul 2017 03:07 PM My Price 9.00

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