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Suppose that it is January, and your bank makes a $1 million loan with a one-year maturity and carries 4% fixed interest rate. The bank initially finances the loan by issuing a $1 million 3-month Eurodollar CD paying 2.5%. After the first three months, the bank expects to finance the loan by issuing another $1 million 3-month Eurodollar CD in April (assume the rate becomes 2.9%), and another $1 million 3-month Eurodollar CD in June (assume the rate becomes 2.4%), and another $1 million 3month Eurodollar CD in Sept. (assume the rate becomes 3.25%).
Suppose that you want to hedge the interest rate risk through options on financial futures. Your bank decides to buy one put option on each of the June, September, and December Eurodollar futures at 97.5 strike price. The option premium paid for June is .35; for September .75; and for December is 1.12.
Suppose also that on June, the Eurodollar future rate becomes 3.1% and the put option premium becomes .55. In Sept., the Eurodollar future rate becomes 2.8% and the put option premium becomes .45. In Dec., Eurodollar future rate becomes 4.3% and the put option premium becomes 1.95
You need to set-up a table that shows (1) profit and loss profile of your bank hedge operation; (2) the effective average cost of your bank CD
Potter Company has a unique opportunity to invest in a two-year project in Australia. The project is expected to generate 1,100,000 Australian dollars (A$).
Explain how commercial banks and NBFIs are achieving these goals and discuss its implications for risk and return.
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Martin possesses real and personal property of substantial value, inlcuding several large life insurance policies on his life. He is considering creating.
you were hired as a consultant to giambono company whose target capital structure is 40 debt 15 preferred and 45 common
If the current annual interest rate on a HELOC is3.85%and your tax rate is 32%, what is the after-tax interest rate you will pay on any borrowings under the HELOC?
Bill needs $40,000 6 years from now to attend college. How much must Bill put in the bank every three months (8% compounded quarterly) to reach his goal?
A 6.90 percent coupon bond with 28 years left to maturity can be called in nine years. The call premium is one year of coupon payments.
Do discounted cash flow techniques give the same accept-reject decision when evaluating independent projects with conventional cash flows? Why or why not?
Calculate the financial ratios
In a recent year, about 2/3 of US houiseholds purchased group coffee. Consider the annual ground coffee expenditures for househols purchasing.
Computation of future annual payments and how much income will the grandchild receive each year
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