18) You own 10 futures contracts on gold that you purchased at a quoted price of
ID: 2825384 • Letter: 1
Question
18) You own 10 futures contracts on gold that you purchased at a quoted price of 1,483.9. The current price quote is 1,403.2. The contract size is 100 ounces and the quotes are expressed in dollars and cents per ounce. What is your current profit or loss on this investment?
19) Alicia owns 600 shares of Danube stock. She thinks the market price will continue to rise but would like to ensure that she can get at least $47.50 a share should she decide to sell her shares. The 47.50 call option is quoted at $1.05 bid, $1.11 ask. The 47.50 put is quoted at $0.80 bid, $0.89 ask. How much will it cost her to ensure that she can sell all of her shares for at least $47.50 each?
20) The Stable Utility Fund has an offering price of $54.35 and an NAV of $52.19. What is the front-end load percentage?
Explanation / Answer
18) Answer: Loss $80,700
10 future contracts
contract size = 100 ounce
Purchase price = 1483.9
Current Price = 1403.2
Purchase value = 1483.9 * 10 * 100 =14,83,900
Current Value = 1403.2 * 10 * 100 = 14,03,200
Current loss = $80,700
19) Answer = $534
owns 600 shares
To ensure that she can sell all of her shares for at least $47.50 each, she need to purchase 47.50 put option at price of $0.89.
Cost of buying put option = 600 * $0.89 = $534
To ensure that she can sell all of her shares for at least $47.50, the cost will be $534.
20) Answer = 3.9742%
offer price = NAV + front-end load
Front-end load = offer price - NAV
Front-end load = $54.35 - $52.19 = $2.16
Front-end load percentage = 1 - (NAV/offer price)
Front-end load percentage = 1-(52.19/54.35) = 0.039742 = 3.9742%
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