Questions from Business Statistics

Q: A futures contract is used for hedging. Explain why the daily

A futures contract is used for hedging. Explain why the daily settlement of the contract can give rise to cash-flow problems.

Q: An airline executive has argued: ‘‘There is no point in

An airline executive has argued: ‘‘There is no point in our using oil futures. There is just as much chance that the price of oil in the future will be less than the futures price as there is that it...

Q: Suppose that the 1-year gold lease rate is 1.

Suppose that the 1-year gold lease rate is 1.5% and the 1-year risk-free rate is 5.0%. Both rates are compounded annually. Use the discussion in Business Snapshot 3.1 to calculate the maximum 1-year g...

Q: Explain what is meant by a perfect hedge. Does a perfect

Explain what is meant by a perfect hedge. Does a perfect hedge always lead to a better outcome than an imperfect hedge? Explain your answer.

Q: For the situation considered in Problem 13.5, what is

For the situation considered in Problem 13.5, what is the value of a 1-year European put option with a strike price of $100? Verify that the European call and European put prices, satisfy put–call par...

Q: The author’s website (www-2.rotman.utoronto.

The author’s website (www-2.rotman.utoronto.ca/hull/data) contains daily closing prices for the crude oil futures contract and the gold futures contract. You are required to download the data for crud...

Q: Give three reasons why the treasurer of a company might not hedge

Give three reasons why the treasurer of a company might not hedge the company’s exposure to a particular risk.

Q: A 3-year bond provides a coupon of 8% semiannually

A 3-year bond provides a coupon of 8% semiannually and has a cash price of 104. What is the bond’s yield?

Q: Suppose that the 6-month, 12-month, 18

Suppose that the 6-month, 12-month, 18-month, and 24-month zero rates are 5%, 6%, 6.5%, and 7%, respectively. What is the 2-year par yield?

Q: The forward price of the Swiss franc for delivery in 45 days

The forward price of the Swiss franc for delivery in 45 days is quoted as 1.1000. The futures price for a contract that will be delivered in 45 days is 0.9000. Explain these two quotes. Which is more...