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a. A bank made a 6-month $100 million loan at 6% funded by a 3-month deposit at 3%.To protect against interest rates when rolling over the deposit in three months, the bank decides to hedge using a forward rate agreement. Show the steps to hedge and maintain the current spread and the cash settlement if interest rates change +/- 2%. Use 91 days for 3-month FRAs.
b. Show the net 3-month spread in dollars earned by the bank after it rolls over the deposit for all three interest rate scenarios after hedging with FRAs.
You sold a security for $980 that you purchased five years before for $795. What was the holding period return? Prove that this return overstates the annualized, compound return. Please explain how you got the answer.
Your bank account pays interest with an EAR of 4% What is the APR quote for this account based on semiannual compounding?
How high does the stock price have to rise for an investment in options to be as profitable as an investment in the stock?
IN the Vina San Pedro case What advantages does VSP have in the domestic market?
At the end of three months, the firm must repay the $30,000 plus $675 in interest. What is the effective annual rate on this loan?
You purchase a call option on Swiss Franc (SFr) for a premium of $0.01 per SFr, with an exercise price of $0.65. If at the maturity date, the spot rate.
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Explain the significance of equities, stockbroker, Efficient Market Hypothesis, portfolio diversification, mutual fund, net asset value, 401(k) plan, stock.
Boilermaker House Painting Company incurs the following transactions for September.
Construct and solve the DuPont and Modified DuPont equations for Saratoga Farms. What would be the impact on ROE if the debt to TA ratio were 80%? What would be the impact on ROE if the debt to TA were 20%
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