MATH 534 Final: MATH 537 UMass Amherst finalS05
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Instructions: show all your work for full credit, and indicate your answers clearly. There are eight (8) questions: companies a and b have been o ered the following rates per annum on a million. Company a requires a xed-rate loan; company b requires a oating-rate loan. Design a swap that will net a bank, acting as an intermediary, 30 basis points, and that will appear equally attractive to a and b. 1: the current asset price is . The risk free rate is 5% (unless otherwise noted, all rates are continuously compounded). It costs, today, to store the asset for. The asset is expected to pay a dividend of in 3 months. A futures contract has a contract size of 10 assets. Compute the delivery price for one contract in 6 months. 2: the current price of 5collegeinc is per share. It has a volatility of 20% and an expected return of 10%.
