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1) A bank has a $80 million mortgage bond risk position which it hedges in the Treasury bond futures markets at the Chicago Board of Trade. Approximately how many contracts are needed to be held in the hedge?
2) On June 1, you contract to take delivery of 1 ounce of gold for $965. The agreement is good for any day up to July 1. Throughout June, the price of gold hit a low of $960 and hit a high of $990. The price settled on June 30 at $980, and on July 1st you settle your futures agreement at that price. Your net cash flow is:
3) Firm A is paying $750,000 in interest payments a year while Firm B is paying LIBOR plus 75 basis points on $10,000,000 loans. The current LIBOR rate is 6.5%. Firm A and B have agreed to swap interest payments. What is the net payment this year?
4) A mortgage banker had made loan commitments for $20 million in 3 months. How many contracts on Treasury bonds futures must the banker write or buy?
5) Duration is defined as the weighted average time to maturity of a financial instrument. Explain how this knowledge can help protect against interest rate risk.
Relevant incremental cash flows include:
The stock price of Chevron (CVX) closed on March 6 at $87.93 per share. The annual dividend is $4.28 and is not expected to grow. The net income for the year ending 12/31/13 was $4.587 billion. There are 1.88 billion shares outstanding. What is the d..
A bank offers an investment opportunity, which requires you to invest 10,000 today and the bank promises to return 15,000 in 10 years. What is the embedded interest rate offered by the bank?
Describe the role of the financial institutions and financial markets in our economy. Differentiate between primary and secondary markets. Differentiate between money and capital markets.
Find conditions under which a "pooling equilibrium," in which the entrepreneur keeps a low profile (yˆ1 = 0) when successful (y1 = R1), prevails.
Franklin Templeton has just invested $9,260 for his son (age one). This money will be used for his son’s education 18 years from now. He calculates that he will need $71,231 by the time the boy goes to school. what rate of return will mr. templeton n..
Does the stock perform better than their industry peers (calculate the stock returns for the industry peers during the same period and compare it with your firm’s returns)? Why do you think the returns are better or worse than the industry peers and ..
Taussig Technologies Corporation (TTC) has been growing at a rate of 20% per year in recent years. This same growth rate is expected to last for another 2 years, then decline to. Now assume that TTC’s period of supernormal growth is to last for 5 yea..
The controller in a hospital is usually responsible for which of the following activities (choose all that apply): A. Collection of accounts receivable B. Developing budgets C. Filing Medicare cost reports D. Arranging hospital loans
Torch industries can issue perpetual preferred stock at a price of $57.00 a share. The stock would pay a constant annual dividend of $6.00 a share. What is the company's cost of preferred stock, Rp?
A type of agency problem that results in shareholders gaining by choosing not to finance new, positive-NPV projects is:
Apply the accounting equation; evaluate business operations.- City Car Wash, Inc., has current assets of $180 million; property, plant, and equipment of $300 million;
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