I have this homework due which requires math calculations and two pages essay. Document Preview:

Fi 4200 Homework Exercise No. 2 (please do all work independently; due date Monday 9/14/15) 1. Using market information (e.g., prices/rates) as of the close of Tuesday, September 1 (see CMEGROUP.com and Wednesday WSJ (online or hard copy) for Tuesday price info), address the following questions regarding the Palladium futures contract, which is listed on the CME Group futures exchange. Assumptions: Assume the “Palladium, Engelhard industrial bullion” price is a reasonable proxy for the spot (cash) price. To find this price, go to wsj.com, Look for and click on “Market Data Center.” Next, click on “Commodities & Futures” and click again on “Cash Commodity Prices” which is listed under “Spot Prices”. For futures prices, keep looking for “Futures Settlements” under “Settlement Prices, Indexes & Other Statistics” (or go to cmegroup.com and look under metals). rdAssume that the maturity date of this futures contract is the 3 last business day of the maturity month. To get your relevant financing rate (for borrowing or lending), see “Money Rates” under “Bonds, Rates & Credit Markets” and use London Interbank Offered Rates (“Libor”). Of the various Libor maturities reported (e.g., 1, 3, 6, or 12 months) use the one with a term most closely matching that of the futures maturity date, but when computing the financing cost please be sure to use an actual day count and a 360 day year (e.g., use “Actual/360” convention). Also, assume warehousing and delivery costs are negligible and ignore for now convenience yields and leasing opportunities. Questions: (A) Determine the theoretical futures price ($ per ounce) for the December 2015 Palladium futures contract using procedures discussed in class. (B) i) Compare the actual reported futures price to your answer in part (A); and ii) If the actual and theoretical futures prices differ, explicitly detail the steps for conducting an arbitrage and compute the potential arbitrage…