Exam 6: The Wide World of Futures Contracts

An investor wants to hold 200 euro two years from today. The spot exchange rate is $1.31 per euro. If the euro denominated annual interest rate is 3.0% what is the price of a currency prepaid forward?

Interest rates on the U.S. dollar are 6.5% and euro rates are 5.5%. The dollar per euro spot rate is 0.950. What is the arbitrage profit on a required $1 million Euro payment if the forward rate is 0.980 dollars per Euro and the exchange occurs in one year?

During one fall week, the city of Indianapolis had daily average Fahrenheit temperatures of 85, 72, 65, 70, 76, 62, and 73 degrees. What is the CDD for this week?

If hog farmers expect a return of 8.0% on their investment in livestock, what is the approximate implied increase in pork belly commodity prices over the next 6 months?

Interest rates on the U.S. dollar are 5.4% and euro rates are 4.6%. Given a dollar per euro spot rate of 0.918, what is the 6-month forward rate ($/E)?

The spot price of corn is $2.23 per bushel. The opportunity cost of capital for an investor is 0.5% per month. If storage costs of $0.04 per bushel per month are factored in, all else being equal, what is the likely price of a 4-month forward contract?

Forward prices for gold, in dollars per ounce, for the next five years are 305, 333, 360, 388, and 425, respectively. A mine can be opened for 3 years at a cost of $600. Annual mining costs are a constant $100 and interest rates are 5.0%. When should the mine be opened to maximize NPV?