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sergeinik [125]
3 years ago
12

A futures contract on corn that matures exactly 6 months from now is trading at $3.32 per bushel. The spot price of corn is $3.2

0. If the continuously compounded annual risk-free rate is 5%, then the arbitrage strategy right now is: Multiple Choice Short the futures contract; Borrow at the risk-free rate; Long corn; Long the futures contract; Borrow at the risk-free rate ; Short corn; Short the futures contract; Invest at the risk-free rate; Long corn; Long the futures contract; Invest at the risk-free rate ; Short corn;
Business
1 answer:
TiliK225 [7]3 years ago
8 0

Answer:

Short the futures contract; Borrow at the risk-free rate; Long corn;

Explanation:

Spot rate = $3.20

Therefore implied future rate = spot x ert

Therefore implied future rate = 3.20 x e0.05 x 6/12

Therefore implied future rate = 3.20 x 1.025315

Therefore implied future rate = 3.281

Since implied future rate < future rate, we will short future contract and borrow and buy at spot

Therefore, 1st choice is correct

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6 0
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January 28 Write off accounts receivable as uncollectible, $4,800. January 30 Firework sales for the second half of the month to
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Answer:

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Cr Account Receivables                 4,800

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Explanations are given in each entry.

6 0
3 years ago
Free pointssss free pointssss
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Answer:

why not

Explanation:

i mean... why not

8 0
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so according to the given situation, the last option is correct

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