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Lizard National Bank purchases a three-year interest rate cap for a fee of 2 percent of notional principal valued at $50 million, with an interest rate ceiling of 11 percent and LIBOR as the index representing the market interest the same time, Lizard selles - a three year floor ( 8 percent) for a fee of 1 percent of the 50$ millon principal . A libor is expected to be 7 percent ,12 percent , and 13 percent at the end of each of the next three year .
1. What is the name of this strategy ?
2. How much Lizard received (or paid) using this strategy?
What are the prices of a call option and put option with the following characteristics: Stock Price (P0) = $69 Exercise Price
Stock X has an expected return of 0.11. It has a beta estimated at 0.8, a risk-free rate of 0.03 and a risk premium of 6.1. Its variance of returns is 0.0106. All returns here are expresed as decimals, not percentages. What is its coefficient of vari..
The investment would cost her $180,000. What would the return on her investment be?
Which one of the following is most indicative of a flexible short-term financial policy?
You are short 27 gasoline futures contracts, established at an initial settle price of $2.505 per gallon, where each contract represents 42,000 gallons. Compute the balance in your margin account at the end of each of the four trading days, and compu..
Trend analysis is a form of sales forecasting where potential customers are studied.
explain how different asset classes and the number of securities can influence risk management.
What might cause a parallel shift in the yield curve?
Retained earnings that were generated in the past and are reflected on the firm’s balance sheet are generally available to finance the firm’s capital budget during the coming year. The WACC is calculated using before-tax costs for all components. The..
The problem below must be solved using rate of return analysis. Type B equipment has an installed cost of $9,000, a uniform annual benefit of $1,600, a salvage value of $3000, and a useful life of 6 years. Type A equipment has an installed cost of $1..
The CFO thinks the WACC should be based on market value weights, What is the difference between these two WACCs?
Suppose the stock of Host Hotels and Resorts is currently trading for $25 per share. If Host issued a 20% stock dividend, what will its new share price be?
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