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Smith holds a long position for a Stock index futures contract which is four months from maturity. A stock index currently stands at 350. The risk-free interest rate is 8% per annum (with continuous compounding) and the dividend yield on the index is 4% per annum.
a) What should the futures price for a four-month contract be?
b) Suppose one month later the stock price is 351. The dividend yield and index are the same. What is the value of the contract now?
Defined-benefit plans are favourable to employees for which of the following reasons. All of the following statements comparing a profit-sharing plan to a pension plan are correct, EXCEPT: All the following statements concerning qualified target-bene..
Use a present worth analysis to determine if the decision to invest is sensitive to the projected range of revenue.
Define the current ratio and return on assets ratio. State what financial management problem each of these financial ratios could be used to identify. What would be a good benchmark to use for each of these financial ratios?
You are considering a project with the following data: Internal rate of return 8.7% Profitability ratio .98 Net present value −$393 Payback period 2.44 years Required return 9.5% Which one of the following is correct given this information?
What is the implied cost of capital? Assume capital markets are perfect.
The proposition that a firm borrows up to the point where the marginal benefit of the interest tax shield derived from increased debt is just equal to the marginal expense of the resulting increase in financial distress costs is called:
Pay 2.0 percent per quarter on any funds actually borrowed. Maintain a 4 percent compensating balance on any funds actually borrowed. Pay an up-front commitment fee of 0.150 percent of the amount of the line. Ignoring the commitment fee, what is the ..
You will not pay off the mortgage early. Assume the homeowner will remain in the house for the full term and ignore taxes in your analysis.
Current effects on cash flows: How should appreciation of a firm's home currency generally affect its cash inflows? Transaction exposure.
An explanation of the economic dilemma posed.
Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Calculate the payback period for this project.
Katie's Dinor spent $113,800 to refurbish its current facility. The firm borrowed 65 percent of the refurbishment cost at 6.82 percent interest for six years. What is the amount of each monthly payment?
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