Business, 18.11.2019 19:31 depinedainstcom

Suppose that the spot price of oil is us$95 and the quoted 1-year futures price of oil is us$125. note that a quote is the last price at which a security or a commodity traded, that is, the most recent price on which a buyer or a seller agreed and at which some amount of the asset was transacted. therefore, bid and ask quotes are the most current prices at which the security or the commodity can be bought or sold. for this exercise just assume that bid=ask=quote. assume also that the risk-free interest rate is 5% per annum with discrete compoundingfor all maturities. moreover, the storage cost of oil are 2% per annum and based on the spot price. show that there is an arbitrage opportunity and the profit of this arbitrage is equal to $23.35. for full credit you must show all the steps, explain the strategy you would put into practice to take advantage of this arbitrage opportunity and explain what is the source of the arbitrage gain.

Answers: 1

Show answers

Another question on Business

Business, 22.06.2019 07:00

Pennewell publishing inc. (pp) is a zero growth company. it currently has zero debt and its earnings before interest and taxes (ebit) are $80,000. pp's current cost of equity is 10%, and its tax rate is 40%. the firm has 10,000 shares of common stock outstanding selling at a price per share of $48.00. refer to the data for pennewell publishing inc. (pp). pp is considering changing its capital structure to one with 30% debt and 70% equity, based on market values. the debt would have an interest rate of 8%. the new funds would be used to repurchase stock. it is estimated that the increase in risk resulting from the added leverage would cause the required rate of return on equity to rise to 12%. if this plan were carried out, what would be pp's new value of operations? a. $484,359 b. $521,173 c. $584,653 d. $560,748 e. $487,805

Answers: 1

Answer

Business, 22.06.2019 15:50

Singer and mcmann are partners in a business. singer’s original capital was $40,000 and mcmann’s was $60,000. they agree to salaries of $12,000 and $18,000 for singer and mcmann respectively and 10% interest on original capital. if they agree to share remaining profits and losses on a 3: 2 ratio, what will mcmann’s share of the income be if the income for the year was $15,000?

Answers: 1

Answer

Business, 22.06.2019 23:40

Gdp has grown in a country at 3% per year for the last 20 years. the labor force has grown at 2% per year and the quantity of physical capital has grown at 4% per year. a 1% increase in average physical capital per worker (other things equal) raises productivity by 0.3%. average education has not changed. how much has growing physical capital per worker contributed to productivity growth in this country? choose the correct answer from the following choices, and then select the submit answer button. answer choices 0.3% 0.6% 3.0% 6.0%

Answers: 1

Answer

Business, 23.06.2019 00:40

An upper-middle-class manager tends to have hostile relationship with the working-class employees in the firm because of his tendency to perceive himself as superior to them based on his class background. in this example, the manager exhibits: question 14 options: 1) class consciousness. 2) cultural awareness. 3) social mobility. 4) group orientation.

Answers: 3

Answer

You know the right answer?

Suppose that the spot price of oil is us$95 and the quoted 1-year futures price of oil is us$125. no...

Questions