What is the dimension in feet for a tank that has a diameter of 138 inches and a height of…

What is the dimension in feet for a tank that has a diameter of 138 inches and a height of 198 inches?
 

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finance 403

1. (10 marks) Suppose you bought two one-year gold futures contracts when the one-year futures price of gold was $1650 per ounce, and closed the position at the end of the sixth trading day. The initial margin requirement is $8,000 per contract, and the maintenance margin requirement is $7,000 per contract. One contract is for 100 ounces of gold. The daily prices on the intervening trading days are shown in the following table.

 

 

 

Day

Settlement Price

Mark-to-Market ($)

Other
Entries

Account Balance ($)

Explanation

0

1650.00

1

1660.00

2

1640.00

3

1630.00

4

1660.00

5

1650.00

6

1640.00

Closed

 


Assume that you deposit the initial margin and do not withdraw the excess on any given day. Whenever a margin call occurs, you would make a deposit to bring the balance up to meet the initial margin requirement. Fill the appropriate numbers in the blank cells. (Hint: Refer to Table 8.2 on p. 272 of the textbook.)

 

 

 

 


2. (12 marks) A soybean oil futures contract of CBOT covers 60,000 pounds of soybean oil. The initial margin is $2,025 and the maintenance margin is $1,500. Suppose you are going to short five August soybean futures contracts for the price of $0.32 per pound.

 

 

 

a.    How much margin deposit do you need to put up? (2 marks)

 

 

 

b.    At what price would there be a margin call? (5 marks)

 

 

 

c.     If the futures price rises by 5% next day, what would be your loss and margin variation? (3 marks)

 

 

 

d.    How can you close your position in May? (2 marks)

 

 

 

3. (8 marks) Suppose you have a short position in a forward contract for 500 troy ounces of gold at $920. The contract has 10 months to expire. Currently, the spot price of gold is $922, and the risk-free rate and the rate of storage cost are 8% and 3% per annum, respectively. Both rates are continuously compounded. What is the value of the contract to you?

 

4. (10 marks) Consider the 90-day futures on stock ABC. Currently, the share price of ABC is $80 per share. The stock is expected to pay a dividend of $1.50 in one month’s time. Assume that the simple interest rate is 8% per year, and that there are 30 days in a month. Determine the price of the futures and the dollar cost of carry, assuming no arbitrage opportunities are present.

 

 

 

5. (8 marks) You buy 500 shares of stock ABC at $60 per share and short five September futures contracts at $62 per share. One contract is for 100 shares. If you close your position on June 1 when the basis is $5, how much money can you get?

 

 

 

6. (10 marks) Currently, the spot price of silver is $9 per ounce and the one-year futures price of silver is $11. The storage costs are $0.24 per ounce per year payable at the end of the year. Assume the simple interest rate is 10% per annum.

 

 

 

  1. What is the “fair” one-year futures price of silver? What is the cost of carry? (4 marks)

 

 

 

  1. How can you make an arbitrage profit? Show your transactions in details using a numerical example. (6 marks)

 

 

 

7. (12 marks)  Today is February 15. Suppose you are an oil dealer and hold a position of 200,000 barrels of crude oil. You hedge by trading May crude oil futures, each of which is on 10,000 barrels. The hedge will be on until April 15. The current spot price and the May futures price are $20.50 and $20.00 per barrel, respectively. For simplicity, a hedge ratio of 1 is used.

 

 

 

  1. How many contracts will you use? Long or short? (3 marks)

 

 

 

  1. What is the basis today? (3 marks)

 

 

 

  1. If the basis on April 15 is 20% higher than today’s basis, what is your gain or loss? (3 marks)

 

 

 

  1. If the basis on April 15 is 0.05 lower than today’s basis, what is your gain or loss? (3 marks)

 

 

 

8.  (12 marks) Chococo Inc., a producer of powdered hot chocolate, has just received a large order that will require the purchase of 750 metric tons of cocoa in 3 months.  The current spot price of cocoa is $2,645 per metric ton. The standard deviation of the value for the inventory is 0.15. Mr. Dulce, the CFO of the Chococo, is considering a minimum-variance hedge of this future cocoa purchase using the three-month cocoa futures contract. The contract size is 10 metric tons. The volatility of the futures is 0.2. The covariance between the change in the spot and futures cocoa price is 0.027. 

 

 

 

a.    Compute the minimum-variance hedge ratio. (5 marks)

 

 

 

b.    How many contracts she should trade? Long or short? (3 marks)

 

 

 

c.     What is the estimated effectiveness of this minimum variance hedge?
(2 marks)

 

 

 

d.    What is the correlation of the change in the spot and futures cocoa price?
(2 marks)

 

 

 

9.   (15 marks) You manage a portfolio that is currently all invested in equities in companies in five major Canadian industries. The market value involved and beta for each industry are shown in the table below.

 

 

 

Industry

MV

Beta

Oil and Gas

$1,000,000

1.2

Technology

600,000

1.5

Utilities

1,500,000

0.8

Financial

800,000

1.3

Pharmaceutical

1,300,000

1.1

 

 

 

You believe that the Canadian equity market is on the verge of a big but short-lived downturn. You would move your portfolio temporarily into T-bills, but you do not want to incur the transaction costs of liquidating and reestablishing your equity position. Instead, you decide to hedge your portfolio with three-month S&P/TSX 60 index futures contracts for one month. Currently, the level of the S&P/TSX 60 index is 678.68, the three-month futures price of the S&P/TSX 60 is 665.60, and one contract is for $200 times the index. The annual simple risk-free rate of return is 1%.

 

 

 

  1. How many futures contracts should you use? Long or short? (5 marks)

 

 

 

  1. Suppose the return on the S&P/TSX 60 index is -5% in one month, and the S&P/TSX index futures price falls to 620 in one month. Calculate your net gain or loss on your hedged portfolio in part (a). (10 marks)

 

 

 

 

 

 

 

10. (3 marks)

 

  1. Define contango and normal contango, and describe the difference(s) between the two. (1 mark)

 

 

 

  1. Define backwardation and normal backwardation, and describe the difference(s) between the two. (1 mark)

 

 

 

  1. Is it possible for normal contango and backwardation to occur at the same time? (1 mark)

 

 

 

 

 

 

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Frederick Herzberg

Frederick Herzberg was a proponent of teams and teamwork. Describe his work in this area as a major contributor of self-managed work teams. Describe a self-managed work team.

Your response should be at least 500 words in length.  All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations.

 

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. A drag race was held with 20 contestants. The best time was 7.4 seconds, and the worst time was…

. A drag race was held with 20 contestants. The best time was 7.4 seconds, and the worst time was 10.3 seconds. Only half of the contestants advance to the final race. Which measure of central tendency should be used to calculate the cutoff time for the final race?
 

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Case 1,2,3 and 5 Do not write an essay. Answer each numbered point separately and number your answers to…

Case 1,2,3 and 5 Do not write an essay. Answer each numbered point separately and number your answers to correspond to the questions/directions. For the Thiroux analysis, make a separate paragraph for each principle. You may single space your answers. You do not need to copy the full case – simply head your answer CASE 1 – DICK AND JANE – 25 POINTS (ALL STUDENTS) Dick and Jane have insured their house and cars with Farmer’s Mutual for 10 years. During this time, they filed only one claim for $500, and the premiums have risen 100%. Two weeks ago, while backing out of the garage, Jane damaged the right fender. They didn’t fix it, and yesterday, while Jane was parked at the supermarket, someone hit the right side of the car, damaging everything but the right fender. They are taking the car in for repairs, and are deciding whether to include the right fender (undamaged in the collision) in the estimate for the insurance company. The cost of repair of the fender is much more than their deductible allowance. Dick and Jane argue that the insurance company has made thousands of dollars from their premiums alone, not to mention all the other people they insure, so they’ll hardly miss the few thousands that their repairs will cost. They argue that many of their friends have done the same – included items that were not part of actual collision damage. They also reason that it’s unlikely that they will be discovered, because the fender could easily have been damaged in the collision. You are Dick (or Jane) – how should you decide? 1. Who are the stakeholders? 3PTS 2. Clarify the facts – what are the important facts in the problem? 2 PT 3. What is the ethical dilemma (the ethical problem – the ethical decision that must be made)? 3PTS 4. For this case, you may apply the Thiroux principles, or you may apply one of the other approaches (Justice test, Common Good test, etc.) If you apply the Thiroux principles, follow the directions found at CASE 2 – THE IMMIGRANT. If you apply one of the other approaches, first introduce and define the test, then explain why this test (Justice, Common Good, etc.) is the best method of resolving this moral dilemma. 6 PTS 5. Apply the test. 6 PTS 6. With respect to this situation, what are the strengths of the test you chose? 2.5 PT 7. With respect to this situation, what are the weaknesses of the test you chose? 2.5 PTS CASE 2 – THE IMMIGRANT – 25 POINTS (ALL STUDENTS) You are a supervisor. Maria Elena is under your supervision. She is an excellent worker; she is bi-lingual and has been invaluable in helping you to communicate with other Latino workers in your section. Over the past three weeks, however, you’ve noticed Maria Elena becoming very upset and her work is suffering. You take her aside and ask her what’s wrong. She tells you this story: She came to the United States ten years ago from Mexico with her child, Miguel, who is now 9 years old. They entered the country on a visitor’s visa that has expired, and Maria Elena now uses a Social Security card which she acquired illegally. Maria has since had another child, Jose, born in the United States, who is a U.S. citizen. Her common-law husband, Luis, using a false green card, now works as a busboy for a restaurant, which withholds part of his salary for taxes. In Mexico, Maria Elena and Luis lived in a small village where it was impossible to earn more than $3 a day. Both had sixth-grade educations, common in their village. Life was difficult, but they did not decide to leave until they realized the future would be bleak for their child “All the money we make is for Miguel and Jose,” she tells you. “We work hard for their education and their future.” Now, however, her mother in Mexico is dying, and Maria Elena must return home, leaving Luis and the children. She does not want to leave them because she might not be able to get back into the United States, but she is pretty sure she can find a way to return if she has enough money. That is her problem: She doesn’t have enough money to make certain she can get back. Maria Elena doesn’t ask you for money, only tells you so you understand why she is so distracted. After she tells you her story, she becomes too distraught to continue talking. Your employer has recently had a special meeting of all supervisors, in which they advised them to immediately report any instance of an undocumented worker and explained that the company faced fines and penalties for employing undocumented workers.* You now know she is an undocumented immigrant, working for your employer. What should you do? (You are the supervisor) *There are civil and criminal penalties for hiring illegal aliens. Sec. 274A of the Immigration and Nationality Act (INA) and 8 U.S.C. 1324a, makes it unlawful for any person knowingly to hire, recruit or refer for a fee any alien not authorized to work. An employer that violates these laws can face penalties of: • $250 to $2,000 fine for each unauthorized individual; • $2,000 to $5,000 for each employee if the employer has previously been in violation; or • $3,000 to $10,000 for each individual if the employer was subject to more than one cease and desist order. The employer could also be fined $100 to $1,000 for each individual “paperwork” violation. The criminal penalties for a pattern and practice violation can be up to $3,000 for each unauthorized alien, imprisonment up to six months, or both. 1. Who are the stakeholders? 3PTS 2. Clarify the facts – what are the important facts in the problem? 2 PT 3. What is the ethical dilemma (the ethical problem – the ethical decision that must be made)? 3PTS 4. Apply the Thiroux approach to this case. Identify and interpret the relevant ethical principles (Value of Life, Goodness or Rightness, Justice or Fairness, Truth-telling or honesty, Individual Freedom). Some principles will relate more closely to the problem; some might not be applicable at all. 6 PTS 5. Resolve conflicts among the principles (which principle seems most applicable? Which do you think is most important with respect to this case? 6 PTS 6. State the moral decision 1 PT 7. Formulate a course of action 4 PTS CASE 3 – WHALE MARKET OWES ME – 25 POINTS (ALL STUDENTS) Marla works for Whale Market, Inc., a huge retailer that sells a variety of products, including food, clothing, household furnishings, etc. She is a “sales associate” and, like the many other employees of the store who are classed as sales associates, she is scheduled for 30 hours a week and is therefore considered part time; she receives no benefits and is paid slightly more than minimum wage. She is required to wear a white blouse and dark slacks, which she must supply at her own expense. She gets two 15 minute breaks and a half hour for lunch. Recently, the store laid off a number of associates and told those remaining, including Marla, they would have to cover for those positions, effectively increasing Marla’s work load by about 25%. Marla reads that Whale Market, Inc., has had a banner year. Its profits are at a record high, she reads, primarily because of increased efficiency and higher worker productivity. “So,” Marla reasons, “Whale Market is making me work harder, paying me the same amount of money, and making higher profits. I’m doing the work of two employees; they should be paying me double!” Angry at what she feels is an injustice, Marla begins smuggling out small amounts of grocery items and clothing when she leaves each day. “This will help make up for what Whale Market is cheating me out of,” Marla reasons. 1. Who are the stakeholders? 3PTS 2. Clarify the facts – what are the important facts in the problem? 2 PT 3. What is the ethical dilemma (the ethical problem – the ethical decision that must be made)? 3PTS 4. For this case, you may apply the Thiroux principles, or you may apply one of the other approaches (Justice test, Common Good test, etc.) If you apply the Thiroux principles, follow the directions found at CASE 2 – THE IMMIGRANT. If you apply one of the other approaches, first introduce and define the test, then explain why this test (Justice, Common Good, etc.) is the best method of resolving this moral dilemma. 6 PTS 5. Apply the test. 6 PTS 6. With respect to this situation, what are the strengths of the test you chose? 2.5 PT 7. With respect to this situation, what are the weaknesses of the test you chose? 2.5 PTS CASE 5 – THE WHISTLEBLOWER – 25 POINTS – DEVRY STUDENTS ONLY Chantale Leroux works as a clerk for Avco Environmental Services, a small toxic-waste disposal company. The company has a contract to dispose of medical waste from a local hospital. During the course of her work, Chantale comes across documents that suggest that Avco has actually been disposing of some of this medical waste in a local municipal landfill. Chantale is shocked. She knows this practice is illegal. And even though only a small portion of the medical waste that Avco handles is being disposed of this way, any amount at all seems a worrisome threat to public health. Chantale gathers together the appropriate documents and takes them to her immediate superior, Dave Lamb. Dave says, “Look, I don’t think that sort of thing is your concern, or mine. We’re in charge of record-keeping, not making decisions about where this stuff gets dumped. I suggest you drop it.” The next day, Chantale decides to go one step further, and talk to Angela van Wilgenburg, the company’s Operations Manager. Angela is clearly irritated. Angela says, “This isn’t your concern. Look, these are the sorts of cost-cutting moves that let a little company like ours compete with our giant competitors. Besides, everyone knows that the regulations in this area are overly cautious. There’s no real danger to anyone from the tiny amount of medical waste that ‘slips’ into the municipal dump. I consider this matter closed.” Chantale considers her situation. The message from her superiors was loud and clear. She strongly suspects that making further noises about this issue could jeopardize her job. Further, she generally has faith in the company’s management. They’ve always seemed like honest, trustworthy people. But she was troubled by this apparent disregard for public safety. On the other hand, she asks herself whether maybe Angela was right in arguing that the danger was minimal. Chantale thinks about contacting an old friend who works for the local newspaper. You are Chantale. Examine this problem using the Thiroux approach or any test of your choice. Notice that the questions are slightly different here than they are for the other cases. 1. Who are the stakeholders? 2 PTS 2. Clarify the facts – what are the important facts in the problem? 2 PT 3. What is the ethical dilemma? 3PTS 4. Apply the Thiroux approach to this case. Identify and interpret the relevant ethical principles (Value of Life, Goodness or Rightness, Justice or Fairness, Truth-telling or honesty, Individual Freedom). Some principles will relate more closely to the problem; some might not be applicable at all. 6 PTS 5. Resolve conflicts among the principles (which principle seems most applicable? Which do you think is most important with respect to this case? 6 PTS 6. What are the reasonable limits of Chantale’s loyalty to her employer? 3 pts 7. Would it make a difference if Chantale had a position of greater authority? Why? 3 pts
 

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