Question 1a
Marking Guide
| marks | |
| calculation of payment using the forward rate | 1 |
| going short on futures and purchasing put options | 2 |
| predicted futures rate based on basis reduction | 1 |
| futures: expected payment and number of contarcts | 2 |
| options calculation using either 1.06 or .1.07 rate | 3 |
| options calculation using the second rate (or explanation) | 5 |
| advice (1 or 2 marks per point) | 4-5 |
| maximum marks | 15 |