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The management of a jewelry store plans to buy gold in the future and seeks protection against an increase in the price of gold. The current price of gold is $352.40 per ounce. The futures price of gold is $397.80 per ounce. The number of ounces to be hedged is 1,000, and the number of ounces per futures contract is 100. Therefore, 10 contracts will be hedged.
Based on the information given in the question, describe the outcome in detail of this hedge if the price of gold is $392.50 per ounce and the price of the futures contract is $437.90 per ounce when the hedge is lifted.
Suppose the company has a beta of 1.2, the risk-free rate is 2%, and the market risk premium is 6%. What is the price of the company's stock?
A gift of $300 to a city grew to $99,000 in 200 years. At what interest rate compounded annually would this growth occur?
If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. There are two approaches to use to account for flotation costs. The first approach is to add the sum of flotation costs for the debt, preferred, and..
What would happen to real short term interest rates if the economy is going through a global deflationary period?
Lion Equity paid an annual dividend of $3.25 per share last month, and it is anticipated that future dividends will increase by 4% annually. As a shareholder, if you require a 11% return on your investment in Lion Equity, how much are you willing pay..
What is the yield to maturity for these bonds on January 1, 2016 if the market price of the bond on that date is $1,020?
A construction company is investigating two forming options for a new hotel project. - The overhead of the project amounts to $90,000 per month. What is the most economical option?
Beginning three months from now, you want to be able to withdraw $3,700 each quarter from your bank account to cover college expenses over the next four years. Required: If the account pays .77 percent interest per quarter, how much do you need to ha..
Casey must determine ifit is economically preferable to use higher octane gasoline in his new car. The higher octane has a cost of higher than that of the lo octane gas. $0.20/gallon year. His car has an initial cost of $22,000 and an assumed salvag..
Studies of positive earnings surprises have shown that there is
You are 41 years old today and want to plan for retirement at age 65. You want to set aside an equal amount every year from now to retirement.
debt-preferred stock and common stock-the cost of capital is the weighted average cost of all these three source
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