Economics Homework Help

I need support with this Finance question so I can learn better.

1. Assume a firm has a portfolio that contains stocks that track the market index. The firm now wants to change this portfolio to be 20% in commodities and only 80% in the market index. How would the firm use derivatives to implement this strategy?

2. Assume a firm has a portfolio that contains stocks that track the market index. The firm now wants to change this portfolio to be 20% in commodities and only 80% in the market index. How would the firm use derivatives to implement this strategy without using futures contracts?

3. A firm enters into a long position in 10 silver futures contracts at a futures price of $4.52/oz., and closes out the position at a price of $4.46/oz. If one silver futures contract is for 5,000 ounces, what are the investor’s gains or losses?

4. A firm enters into a short futures position in 10 contracts in gold at a futures price of $276.50 per oz. The size of one futures contract is 100 oz. The initial margin per contract is $1,500, and the maintenance margin is $1,100.

(a) What is the initial size of the margin account?

(b) Suppose the futures settlement price on the first day is $278.00 per oz. What is the new balance in the margin account? Does a margin call occur? If so, assume that the account is topped back to its original level.

(c) The futures settlement price on the second day is $281.00 per oz. What is the new balance in the margin account? Does a margin call occur? If so, assume that the account is topped back to its original level.

(d) On the third day, the investor closes out the short position at a futures price of $276.00. What is the final balance in his margin account?

(e) Ignoring interest costs, what are his total gains or losses?

5. The 181-day interest rate in the US is 4.50% and that on euros is 5%, both quoted using the money-market convention. What is the 181-day forward price of the euro in terms of the spot exchange rate S? Assume a spot price of S euros per dollar.