# FINA2005 – Derivatives and Risk Management Module 2 Torrens University Australia

FINA2005 – Derivatives and Risk Management Module 2
Torrens University Australia
FINA2005 Derivatives and Risk Management Module 2 homework questions
1. Differentiate between spot price and forward price.
2. Differentiate between price and value of a forward contract.
3. Explain interest rate parity and how this parity relationship helps to
calculate forward exchange rates from the spot exchange rates. Why
do interest rates vary between two countries
4. Calculate the six-month forward exchange rate between Great Britain Pound (GBP) and
Australian dollar (AUD) if the spot exchange rate for GBP is 1.645 AUD, the Australian
risk-free rate is 2.50% and UK risk-free rate is 2%. Assume that the interest rates are
annually compounded.
5. Calculate the six-month forward exchange rate between Great Britain
Pound (GBP) and Australian dollar (AUD) if the spot exchange rate for
GBP is 1.645 AUD, the Australian risk-free rate is 2.50% and UK riskfree rate is 2%. Assume that the interest rates are continuously
compounded.
6. Suppose you buy a forward contract today at a price of \$95. The contract expires in 30
days. The risk-free rate is 3 percent. Now 10 days later, the spot price of the asset is \$102.
What is the value of this forward contract 10 days after the contract was bought Assume
that the interest rates are annually compounded.
7. Suppose you buy a forward contract today at a price of \$95. The
contract expires in 30 days. The risk-free rate is 3 percent. Now 10
1 days later, the spot price of the asset is \$102. What is the value of this
forward contract 10 days after the contract was bought Assume that
the interest rates are continuously compounded.
8. Should the forward contract (or futures contract) price be higher or
lower when the underlying generates cash flows and by how much
Explain with an example of a stock that pays dividends.
9. Should the forward contract (or futures contract) value be higher or
lower when the underlying generates cash flows and by how much
Explain with an example of a stock that pays dividends.
10. How do cost of carry and risk premium impact the forward contract (or
futures contract) price What are the elements of cost of carry 2

# Our Service Charter

1. ### Excellent Quality / 100% Plagiarism-Free

We employ a number of measures to ensure top quality essays. The papers go through a system of quality control prior to delivery. We run plagiarism checks on each paper to ensure that they will be 100% plagiarism-free. So, only clean copies hit customers’ emails. We also never resell the papers completed by our writers. So, once it is checked using a plagiarism checker, the paper will be unique. Speaking of the academic writing standards, we will stick to the assignment brief given by the customer and assign the perfect writer. By saying “the perfect writer” we mean the one having an academic degree in the customer’s study field and positive feedback from other customers.
2. ### Free Revisions

We keep the quality bar of all papers high. But in case you need some extra brilliance to the paper, here’s what to do. First of all, you can choose a top writer. It means that we will assign an expert with a degree in your subject. And secondly, you can rely on our editing services. Our editors will revise your papers, checking whether or not they comply with high standards of academic writing. In addition, editing entails adjusting content if it’s off the topic, adding more sources, refining the language style, and making sure the referencing style is followed.
3. ### Confidentiality / 100% No Disclosure

We make sure that clients’ personal data remains confidential and is not exploited for any purposes beyond those related to our services. We only ask you to provide us with the information that is required to produce the paper according to your writing needs. Please note that the payment info is protected as well. Feel free to refer to the support team for more information about our payment methods. The fact that you used our service is kept secret due to the advanced security standards. So, you can be sure that no one will find out that you got a paper from our writing service.
4. ### Money Back Guarantee

If the writer doesn’t address all the questions on your assignment brief or the delivered paper appears to be off the topic, you can ask for a refund. Or, if it is applicable, you can opt in for free revision within 14-30 days, depending on your paper’s length. The revision or refund request should be sent within 14 days after delivery. The customer gets 100% money-back in case they haven't downloaded the paper. All approved refunds will be returned to the customer’s credit card or Bonus Balance in a form of store credit. Take a note that we will send an extra compensation if the customers goes with a store credit.

We have a support team working 24/7 ready to give your issue concerning the order their immediate attention. If you have any questions about the ordering process, communication with the writer, payment options, feel free to join live chat. Be sure to get a fast response. They can also give you the exact price quote, taking into account the timing, desired academic level of the paper, and the number of pages.

Excellent Quality
Zero Plagiarism
Expert Writers

or

Instant Quote