Long or short the eurodollar futures contract

Assignment Help Financial Management
Reference no: EM131982661

The December Eurodollar futures contract is quoted as 98.40 anda company plans to borrow $8million for three months starting in December at LIBOR plus 0.5%.

(a) What rate can then company lock in by using the Eurodollar futures contract? Long or short the Eurodollar futures contract? How many contracts?

(b) What position should the company take in the contracts?

(c) If the actual three-month LIBOR turns out to be 1.3% with quarterly com-pounding, How would explain that the company can borrow at the lock-in rate in part (a)?

Ignore timing mismatches between the cash flows from the Eurodollar futures contract and interest rate cash flows.

Reference no: EM131982661

Questions Cloud

What is the maximum monthly charge cookie cutter : What is the maximum monthly charge cookie cutter should pay for this lockbox system if the payment is due at the beginning of the month?
Find the risk-free rate : Carlson Tech's stock has a beta of 1.15 and 10.5% required rate of return. Find the risk-free rate. The primary reason WACC uses an after-tax cost of debt is…
What is the firm after-tax cost of debt on the bond : The firm's average tax rate is 30 percent and its marginal tax rate is 38 percent. What is the firm's after-tax cost of debt on the bond?
What is present value if the first payment comes immediately : what is the present value of the winnings? What is the present value if the first payment comes immediately?
Long or short the eurodollar futures contract : What rate can then company lock in by using the Eurodollar futures contract? Long or short the Eurodollar futures contract?
Calculate present value of the payments for option : Calculate the present value of the payments for option (a) if the interest rate is .75% per month.
What is equal payment at the end of each of four years : What is the equal payment at the end of each of the 4 years? SHOW ALL WORK using the time value of money buttons on the TI BAII Plus Calculator for full credit.
Calculate the quoted futures price for the contract. : The current quoted bond price is $137. Calculate the quoted futures price for the contract.
Treasury bond futures contract had quoted price : Two months ago, a June Treasury bond futures contract had a quoted price of 98'12. Now, the quote price is 97'6. Market interest rates have

Reviews

Write a Review

Financial Management Questions & Answers

  When credit is granted to another firm this gives rise

When credit is granted to another firm this gives rise to a(n):

  What is the fair value of this investment

What is the fair value of this investment if the discount rate is 10%?

  Use as the annual sales figure when evaluating this project

Winnebagel Corp. currently sells 18,000 motor homes per year at $27,000 each, and 7,200 luxury motor coaches per year at $51,000 each. The company wants to introduce a new portable camper to fill out its product line; What is the amount to use as the..

  Shares of stock-what is the beta of your portfolio

You own 400 shares of Stock A at a price of $60 per share, 530 shares of Stock B at $75 per share, and 650 shares of Stock C at $33 per share. The betas for the stocks are 1.3, 1.8, and .6, respectively. What is the beta of your portfolio?

  Firm evaluating expansion of current business

You are a consultant to a firm evaluating an expansion of its current business. what is the net present value of the project?

  Can you make profit via trinagular arbitrage

Assume you have an initial SF12,000,000. Can you make a profit via trinagular arbitrage?

  Example of reimbursement-related contract

The U.S. government employs a large number of contractors throughout many different departments. Unfortunately, not all contractors are scrupulous when seeking reimbursement for costs incurred during their contract period. Research another example of..

  Identify the major problems including their causes

Identify the major problems including their causes in this section. This section evaluates potential solutions for the identified key problems.

  Essential to provide an accurate valuation of firm

Financial ratios are essential to provide an accurate valuation of a firm. Select a publicly traded firm of your choice. You may use the firm you have elected to profile for the course-long Financial Analysis and Proposal assignment or a completely d..

  How much must you save at the end of each of next six yeers

If your investments earn 10 percent pretax and your marginal tax rate is 30 percent, how much must you save at the end of each of the next six years?

  What is the book value for a share of casper stock

Casper Energy Exploration reports that the corporation's assets are valued at $188042000, its liabilities are $74973000, and it has issued 7205000 shares of stock. What is the book value for a share of Casper stock?

  Determine optimal capital structure

How would a financial manager determine optimal capital structure? How would this fit in with the company's capital expenditures, growth plans and operating results?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd