John Hull 10th Edition Ch 1 Questions - CSU LA FIN 5350 - Assignment

672 words - 3 pages

FIN4400- Futures & Options
Ch1 homework solution
1. What is the difference between a long forward position and a short forward position?
Long forward position (aka buying a forward) is an agreement to buy an asset at a certain future
time for a certain price. Short forward position (aka selling a forward) is an agreement to sell an
asset at a certain future time for a certain price.
2. An investor enters into a short forward contract to sell 100,000 British pounds (GBP) for U.S. dollars
at an exchange rate of 1.5000 USD per pound. If the contract is held to expiration how much does
the investor gain or lose if the exchange rate at the end of the contract is (a) 1.49000 and (b)
By shorting the forward the investor has agreed to sell 1 GBP for $1.50. If at expiration the exchange
rate declines to $1.49/GBP the investor would make a profit of $0.01/GBP since he is able to sell
each pound for $1.50 instead of the market rate of $1.49 at expiration. The total profit for the
contract would be GBP 100,000 x $0.01/GBP = $1,000.
Conversely, if at expiration the exchange rate increases to $1.52/GBP the investor would make a loss
of $0.02/GBP since he has to sell each pound for $1.50 instead of the market rate of $1.52 at
expiration. The total loss for the contract would be GBP 100,000 x $0.02/GBP = $2,000.
Notice shorting (or selling a forward) is like betting the underlying asset (in this case the $/GBP
exchange rate) will decline in value.
3. A trader enters into a short cotton futures contract when the futures price is 50 cents per pound.
The contract is for the delivery of 50,000 pounds. If held until expiration how much does the trader
gain or lose if the cotton price at the end of the contract is (a) 48.20 cents per pound and (b) 51.30
cents per pound?
By shorting cotton futures the trader has agreed to sell cotton at $0.50/lbs. If at expiration the price
of cotton declines to $0.482/lbs the trader would make a profit of $0.018/lbs since he is able to sell
cotton at $0.50 vs. the market rate at expiration of $0.482/lbs. The total profit on the contract
would be 50,000 lbs x $0.018/lbs = $900.
Conversely, if at expiration the price of cotton increases to $0.513/lbs the trader would make a loss
of $0.013/lbs sine he has to sell cotton at $0.50 vs the market rate at expiration of $0.513/lbs. The
total loss on the contract would be 50,000 lbs x $0.013/lbs = $650.
4. A company knows that it is due to receive a certain amount of a foreign currency in 4 months. What
type of derivative contract is appropriate for hedging?
If a company is due to receive foreign currency in the future it would benefit if the foreign currency
appreciated in the future. Conversely it would lose money if the foreign currency depreciated in the
future. Therefore, in order to hedge, it would look to gain on its forward contract in the event of a
depreciation of the foreign currency. This would be done by short (or selling) forward contract(s) in
the foreign currency.
FIN4400- Futures & Options
Ch1 homework solution
If using options, the company can buy put options on the foreign currency. This way if the currency
depreciated the gain from the put options would offset the loss from the depreciation of the foreign
5. A U.S. company expects to have to pay 1 million Canadian dollars in 6 months. Explain how the
exchange rate risk can be hedged using a forward contract.
If a U.S. company has to pay 1 million Canadian dollars in 6 months it wants to hedge against the
Canadian dollar appreciating in the future. To hedge against this outcome it would go long (or buy)
Canadian dollar forward contract(s). This way, if the Canadian dollar appreciated, any l oss would be
mitigated by the profit from the forward contract(s).

More like John Hull 10th Edition Ch 1 Questions - CSU LA FIN 5350 - Assignment

Veterinary Science Questions #1-15 - Elective - Assignment

986 words - 4 pages ... Please  Do  Not  Write  On  The  Exam   1   Introduction to Sociology: Exam #2 Socialization 1.)   _____ is the lifelong process of learning to become a member of the social world, beginning at birth and continuing until death. A.   Learning Theory B.   Sociology C.   Socialization D.   Symbolic Interaction 2.)   True or False: Socialization is not a lifelong process. A.   True B.   False 3.)   The main product of the ...

1984 Section 1 Questions - English 2 - Assignment

704 words - 3 pages ... 1. What does the opening sentence suggest about the book? The opening sentence of 1984 helps the reader to transition into the book. It helps to illustrate the world of 1984. Currently, military time is not as common as AM or PM, but it seems common in the world of 1984. Furthermore, the use of military time in the opening sentence of the book could foreshadow the military dictatorship that Winston lives in. 2. The name Winston means from a ...

Chapter 1 Questions About Some History Stuff - History - Assignment

591 words - 3 pages ... Chapter 1 Questions 1. Which of the teleological frameworks most closely match your ethical beliefs? Under what circumstances would you shift toward another of the frameworks? A. The Ethical Egoism is the best fit with my beliefs. B. In the situation of a catastrophe such as hurricane Harvey that just hit us, I would move a little closer to Sidgwick’s Dualism by still having them pay expenses and only making the bare minimum on the product. 2 ...

International Finance Chapter 1 Questions - Athens University International Finance - Assignment

646 words - 3 pages ... their products as other firms enter those markets (product cycle theory). Questions & Applications 1. (#5 a.) The operating characteristics of the firm and the risk perception of international business will influence the degree to which a firm becomes internationalized. 2. (#5 b.) The Internet allows for easy and low-cost communication between countries, so that firms could now develop contacts with potential customers overseas by having a ...

The More Then Your Eyes Can See - Mvhs (english) - Opinion Essay

3279 words - 14 pages ... pass (Ch. 28) • vascular: relating to blood vessels (Ch. 21) • vasopressin: alternate name for antidiuretic hormone, which helps maintain blood pressure (Ch. 26) Explanation This file is my distillation of a chapter in the textbook Fundamentals of Anatomy & Physiology, Tenth Edition, by Frederic H. Martini et al. (a.k.a. “the 10th Martini”), and associated slides prepared by Lee Ann Frederick. While this textbook is a valuable resource, I believe ...

Assignment On Streetcar Named Desire Reflection

773 words - 4 pages Free ... ).REQUIRED READINGS:The required text for the course is:Zimbardo, P.G., Johnson, R.L. & McCann, A.L. (2014). Psychology: Core Concepts, 7th Edition. Boston: PearsonAdditional readings may be assigned throughout the course.Students are expected to complete the indicated readings BEFORE coming to each class.SYLLABUSWeek Topic Reading1….8/25 Introduction and Course Requirements1….8/27- 8/29 Mind, Behavior, and Psychological Science Ch ...

Project Management

1382 words - 6 pages ... PAGE PAGE 1 Project Management Paper Project ManagementCorrer una organización en el mercado actual se ha convertido en un reto, el mercado de valores fluctuantes, las tasas de desempleo y la recesión actual, contaba con organizaciones pioneras que ponían en marcha proyectos para ayudar a la compañía a reducir los costos operativos sin sacrificar sus empleados, algunas organizaciones han tenido que recurrir a ...


3937 words - 16 pages ... ces questions directement parce que l'existentialisme sartrien n'tablit pas systmatiquement des rgles prcises cet effet. C'est indirectement qu'on russit rsumer ce qui devrait tre la morale existentialiste. On ne rejette la morale contraignante de l'extrieur pour la remplacer par une autre. Certaines ides existentielles permettent nanmoins chacun de constituer sa morale. Le but recherch, c'est la libert et que l'homme fasse tout pour atteindre ...

Secret Trusts Essay On Equity And Trusts - University Of Birmingham - Essay

3866 words - 16 pages Free ... all and no evidence of its existence can be discovered on the face of the will hence its name. The latter alludes to the actual existence of the secret trust, however omits the terms[footnoteRef:5]. This short article seeks to address an investigation of the controversial elements surrounding the notion of secret trusts and nonetheless examining Emma Challinor` s assertions. [1: John McGhee, Snells Equity 32nd edn, Sweet & Maxwell [2010] ] [2 ...

Clase En Casa Spanish 104 Assignment - University Of Kansas Span 104 - Assignment

759 words - 4 pages Free ... Gente’s “Estrategias para la comunicación oral”. These strategies will be very useful to be able to ask questions to our guest. B) Think of someone who is really special to you. He/she can be a family member, a friend, a professor, a student, etc. Now, you need to fill out this person’s chart. 1. Crea la ficha de tu persona especial (page 26). Make sure you are following this document’s instructions since the exercise has been modified from the book ...

Le Match Coca Vs Pepsi

4645 words - 19 pages ... vendeurs, 130000 véhicules et 2millions de distributeurs automatiques.1.Le marché de la grande distribution :Ce secteur est le plus important car il représente plus de la moitié des ventes de Sodas.La stratégie de Coca est donc fortement développée à ce niveaux là. Le but principal étant bien sur d'être vu. On considère que 11% des gens qui entrent dans un ...

Political Analysis Of Venezuela - Social Justice - Research Paper

1879 words - 8 pages ... el 1 de septiembre pudiese ser el fin del régimen de Maduro, uno de los factores principales es que no están dos elementos de la fuerza armada nacional que son la subordinación y el descontento que esta dentro de ella, en esta ocasión esta mas desarticulada y posiblemente muchos militares irán a la toma de Caracas, desde entonces no será igual ya que miembros del Psuv se han sumado a esta toma de Caracas convocada por la MUD. Tambien, otro ...


4842 words - 20 pages ... other university responsibilities. Course Texts and Reading Assignments Your course Text is: Peter Stearns, Michael Adas, Stuart Schwartz and Marc Jason Gilbert et al., World Civilizations: The Global Experience, Volume 1, 7th edition, 2014. ISBN-13: 978-0205986293 ISBN-10: 0205986293 First Book Review: Herman Hesse, Siddhartha, (1922), any edition, or free e-book (and free Kindle etc.) at Also, Herman ...

Personal Reflection On Group Assignment - University Of Charles Sturt - Personal Reflection

1152 words - 5 pages Free ... as loyalty, a doer, hard worker and motivating others, but not so good at speaking my voice. This has come to my knowledge that I still have a lot to learn on leadership skills. Reference CSU Charles Sturt University. (2019, MAY 01). Topic 6: Groups & Teams. Groups and Teams. Bathurst, NSW, Australia: Charles Sturt University. Wood, J., Zeffane, R., Fromholtz, M., Wiesner, R., Morrison, R., Factor, A., & McKeown, T. (2019). Organisational Behaviour - Core Concepts and Applications (Vol. 5th Australasian Edition). Milton, QLD, Australia: Wiley. 1 ...

Marketing Environment Of Samsung

6148 words - 25 pages ... KOLEJ UNIVERSITI TUNKU ABDUL RAHMANFaculty of Accountancy, Finance and BusinessFaculty of Applied Sciences and ComputingAcademic Year 2013/2014ABDT2043 FUNDAMENTALS OF MARKETINGCOURSEWORK SPECIFICATIONCoursework Assessment (40%) No. Contributions to coursework % of contribution 1. Mid-Term Test: Multiple Choice Questions 25% 2. Individual Tutorial Presentation 15% 3. Group Written Assignment 60% Total contribution 100 ...