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Interest rate cap profit diagram question
Suppose that you buy an interest rate cap on 3-month LIBOR with a 2-year maturity and simultaneously sell a floor on 3-month LIBOR with a 2-year maturity. Ignore the premiums.
Draw a profit diagram that indicates when you will gain or lose combined position. Compare this with different basic interest rate swap and futures positions.
Based on the settle price on the contract, what is the dollar value of the open interest?
A mutual fund has a 5% front-end load and a NAV of $25 per share. What is the initial sales fee charged on a $3,000 investment?
A company builds a new plant and finances its construction by issuing stock. Which ratio is least likely to be affected, all else being equal?
Sumptuary excise taxes are often called "sin taxes." Why?
Briefly describe how changes in exchange rates affect international trade (export and import).
If the yield curve is upward sloping, then the marketable securities held in a firm's portfolio,
A Treasury note with a maturity of 2 years pays interest semi-annually on a 9 percent annual coupon rate. The $1,000 face value is returned at maturity. If the effective annual yield for all maturities is 7 percent annually, what is the current price..
Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting machine. Two new models are available: Machine 190-3, which has a cost of $215,000, a 3-year expected life, and after-tax cash flows (labor savings and depre..
if the return on an average stock increased by 30 percent while the risk-free rate remained unchanged?
Had the painting been purchased by your great-grandfather and passed on to you, what annual return on investment would your family have earned on the painting?
Respond to the items below. Part A: Given the following cash inflow at the end of each year, what is the future value of this cash flow at 6%, 9%, and 15% interest rates at the end of the seventh year? At what investment rate will the annuity stream ..
Firm R is currently an unlevered firm with an EBIT of $800,000 with 400,000 shares outstanding. The firm is considering issuing $3 million of debt at a before tax cost of 7 percent, and using the proceeds to repurchase stock at the new equilibrium ma..
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