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  3. 3 suppose a trader shorts 450 shares in april when

3 Suppose a trader shorts 450 shares in April when the price per share is...

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Accounting

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3 Suppose a trader shorts 450 shares in April when the price per share is 590 and closes out the position by buying them back in July when the price per share is $100. Suppose further that a dividend of $1.5 per share is paid in May. Please calculate: 20 marks) a. The net profit for short sale. b. The net profit for long position. 4. Consider a U.S. bank that has entered into a forward contract with a corporate client where it agreed to sell the client 1.1 million euros for $1.5 million in one year. Assume that the euro and dollar interest rates are 4% and 3% with annual compounding. (20 marks) a. The value of the contract today in dollars is? b. Delta of the contract? Hedging by buying or selling? c. When the bank enters into the opposite transaction and agrees to buy one million euros in one year, the value of the contract is? d. Delta of the contract? Hedging by buying or selling? 5. Suppose that a portfolio is delta neutral and has a gamma of -2,500. The delta and gamma of a particular traded call option are 0.5 and 2.50, respectively. The portfolio can be made gamma neutral by including in the portfolio a long position of.... in the call option? The gamma of the portfolio is then? (20 marks) Thank you and good luck

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