Assignment:
1. A stock is trading at 20 dollars per share. The stock pays a $.25 quarterly dividend. The annual rate of interest is 6%. What is the value of a one year prepaid forward?
2. A company holding Australian dollars wishes to purchase UK Pounds. The current AUD/GBP (Australian Dollar/Swiss Franc) exchange rate is .4728. The rate on the 10 year bond (U.K.) is 1.79%. What is the value of a 10 year prepaid forward?
3. A company holding Australian dollars wishes to purchase UK Pounds. The current AUD/GBP (Australian Dollar/Swiss Franc) exchange rate is .4728. The rate on the 10 year bond (U.K.) is 1.79%. The rate on the 10 year AUD bond is 2.75%. What is the value of a 10 year forward?
4. A strategy consists of buying a market index product at $800 and longing a put on the index with a strike of $800. If the put premium is $32.00 and interest rates are 0.95% per month, what is the profit or loss at expiration (in 6 months) if the market index is $840?
5. The premium on a call option on the market index with an exercise price of 2010 is $19.70 when originally purchased. After 2 months the position is closed and the index spot price is 2072. If interest rates are 0.5 % per month, what is the Call Profit?