BFW2751: Derivatives 1 Assignment, MUM, Malaysia Nancy Lim a financial analyst, is looking for your guidance regarding her new investment portfolio, which is worth $2 million
University | Monash University Malaysia (MUM) |
Subject | BFW2751: Derivatives 1 |
Question 1
Nancy Lim a financial analyst, is looking for your guidance regarding her new investment portfolio, which is worth $2 million. The department intends to invest the amount for a period of three months, starting from July 1st until October 1st. The fixed annual rate for the investment for 3 month period is 5.10%, 4 months is 5.6% and 5 months is 6.7%. In the past months, you were informed about the uncertainty of the floating rate. The investment period day count convention is 92 days and for FRA pricing, the actual/360 convention is used. On 1st July, the FDA predicted a Libor rate of return of 5.30% per annum.
You are required to calculate and identify the highest net interest revenue for the above investment based on the following interest rate hedge instruments,
- FRA contracts
- Eurodollar Futures contract
- Bank Accepted Bills Futures contracts
Question 2
According to a soybean farmer, they do not utilize futures contracts for hedging as their primary concern is not the price of soybeans, but the potential destruction of their entire crop due to weather conditions.
- What is your viewpoint regarding this approach?
- Do you believe that the farmer should estimate their expected soybean production and utilize hedging to secure a price for the anticipated yield? Under what circumstances is hedging considered preferable?
Are You Searching Answer of this Question? Request Malaysian Writers to Write a plagiarism Free Copy for You.
Question 3
Julia, a portfolio manager at Dane Investment in the US, took a short position in Swiss franc currency futures. Her position comprises 100,000 contracts with an initial margin of $4,000, a maintenance margin of $2,500, and a contract price of 0.912 USD/CHF.
- Assuming a contract size of 1, calculate the balance in Julia’s margin account at the end of the second day if the futures prices were 0.9300 and 0.8928, respectively.
- Fill up the table that summarizes the account balance changes.
Question 4
A fund manager has a portfolio worth $50 million with a beta of 0.87. The manager is concerned about the performance of the market over the next two months and plans to use three-month futures contracts on the S&P 500 to hedge the risk. The current level of the index is 1250, one contract is 250 times the index, the risk-free rate is 6% per annum, and the dividend yield on the index is 3% per annum. The current 3-month futures price is 1259.
- What position should the fund manager take to eliminate all exposure to the market over the next two months?
- Calculate the effect of your strategy on the fund manager’s returns if the level of the market in two months is 1,000. Assume that the one-month futures price is 0.25% higher than the index level at this time.
Stuck in Completing this Assignment and feeling stressed ? Take our Private Writing Services.
Get Help By Expert
Are you struggling with your BFW2751: Derivatives 1 Assignment? Look no further than Assignment Helper MY. Our team of expert writers is here to provide you with top-notch assistance. You can also hire our experts for MBA Assignment Help.
Recent Solved Questions
- Occupational Safety and Health Management Report, OUM, malaysia Discuss the tragedy happened in this movie from the point of view of the Domino Theory and Multiple Causation Theory
- BBM207: Human Resource Management Assignment, WOU, Malaysia Describe how the new wage will benefit employees in the urban areas and Discuss the consequences to the economy of Malaysia
- EEE40002: Integrated Circuit Design Assignment, SUT, Malaysia Ability to evaluate the CMOS transistor characteristics and Conduct investigations of complex problems using research-based knowledge
- GMKT5213: GreenEarth Organic Products is planning to introduce a new line of organic food: Marketing Management, Assignment, UNIRAZAK, Malaysia
- Probability Home Work, HWU, Malaysia The multiplication rule for dependent events is used since we are interested in the first player being a senior
- FA113: Financial Accounting 1 Assignment, RCC, Malaysia The following is the list of transactions for the month of January 2020 for Comfort Furniture a small furniture retailer
- BBPB2103 Human Resource Management OUM Assignment Example Malaysia ,This assignment requires students to apply the human resource knowledge they have acquired, specifically in the job interview.
- Data Mining Case Study, UOM, Malaysia Association analysis is primarily frequency analysis performed on a transaction dataset
- Procurement Management Case Study, TARC, Malaysia Critically discuss pertaining to the FIVE (5) important viewpoints on what makes a Good Project Manager to decide on the above matter
- BNNS6123: Infection and Inflammation in Nursing Assignment, LUC, Malaysia COVID-19 is a recently evolving communicable disease caused by novel strains of severe acute respiratory syndrome coronavirus