Page 240 - AFM Integrated Workbook STUDENT S18-J19
P. 240
Chapter 11
On 1 June – assume interest rate is 2% and futures price is 98.10:
Transaction: $
Interest $10m × 2% × 3/12 (50,000)
Futures/options mkt:
31 March – Put/Sell? 94.00
1 June – Buy 98.10
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Gain? Do not exercise –
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31 March – Call/Buy? 94.50
1 June – Sell 98.10
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Counterparty exercises – gains 3.60% (90,000)
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(× 10 contracts × $1m × 3/12)
Premium (see above) (1,750)
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Net (141,750)
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Effective annual interest rate 5.67%
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Illustrations and further practice
Now try TYU 7 in Chapter 11
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