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The Fed is expected to increase the target federal funds rate. This will tend to flatten the yield curve. With this in mind, please answer the following questions. You are given the following data: Settlement Date: 12-Sep-17 Repo Rate: 3% Reverse Repo Rate: 3.5% 14-Sep-17 2-year 10-year Coupon 3% 5.50% Maturity 31-Aug-19 15-Aug-27 Clean 100.0391 102.1534 Issue date 31-Aug-19 15-Aug-27 19-Sep-17 2-year 10-year Clean 99.9295 103.1450 A). Compute the yields on the above bonds on 14-Sep-17 and 19-Sep-17. B). Compute the invoice price of each bond on 14-Sep-17 and 19-Sep-17. C). Which of these bonds will you use for the Repo transaction? Which one will you use for the Reverse Repo transaction? D). Compute the profit/loss from ONLY the Repo transaction. E). Using a graph explain the change in the yield curve from 14-Sep-17 and 19-Sep-17.
You are discussing your 401(k) with Dan Ervin when he mentions that Sarah Brown, a representative from Bledsoe Financial Services, is visiting East Coast Yachts today. Considering the effects of diversification, how should Sarah respond to the sugges..
A 10-year, 12% semi annual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,060. The bond sells for $1,100. Because of a recession, the inflation rate expected for the coming year is only 3%. However, the inflatio..
What is APR? what is the relationship between a stated interest rate and an APR? If stated rate is 4% per year , calculate the APR when interest rate is compounded (a) annually and (b) monthly ?
Starting to invest late for retirement increases the benefits of compound interest. If the returns of two firms are negatively correlated, then one of them must have a negative beta. If inflation is expected to be relatively high, then interest rates..
If BOOM inc. has a Beta of 1.3 and the current riskfree rate is 3.5% and the market return is expected to be 11% What is the expected return of BOOM inc stock? What if over the next year the actual market return ended up being 8% what return would yo..
Determine which is the better option if the interest rate is 5% per annum. How much money is needed to establish a scholarship fund paying $60,000
How much will the investor receive at maturity? A) $30,000 B) $60,000 C) $1800 D) $20,000
Corporation Y needs to purchase a new machine costing $2.08 million. Management is estimating the machine will generate cash inflows of $396,000 for two years and $300,000 for the following seven years. If management requires a minimum 8 percent rate..
Balanced Scorecard- Your analysis should combine factors and explain why specific strengths complement specific opportunities?
Louise Manufacturing uses 2,600 switch assemblies per week and then reorders another 2,600. The relevant carrying cost per switch assembly is $10.50, and the fixed order cost is $1,300. What are the current carrying costs? Calculate the economic orde..
Your portfolio is diversified. It has an expected return of 11% and a beta of 1.10. You want to add 200 shares of Tundra Corporation at $40 a share to your portfolio. Tundra has an expected return of 13.0% and a beta of 1.50. The total value of the i..
Statement of retained earnings Hayes Enterprises began 2015 with a retained earnings balance of $928,000. During 2015, the firm earned $377,000 after taxes. From this amount, preferred stockholders were paid $47,000 in dividends. Prepare a statement ..
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