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A 6% coupon 10-year bond with a par value 100 is selling at par and is deliverable against a futures contract that settles in 4 months. The current repo rate is 4% p.a. Assume the futures price is currently 100. Identify an arbitrage opportunity as in the above scenario and demonstrate how to implement a strategy to make profits from the arbitrage opportunity.
Calculate the no-arbitrage price of the futures contract.
You are a bond portfolio manager and implement a strategy to earn active returns by betting on the changes of interest rate. You expect the interest rate to decline after the next RBA board meeting. Describe what futures position you need to take in order to adjust the duration of your portfolio.
if 10-year t-bonds have a yield of 5.2 10-year corporate bondsyield 7.5 the maturity risk premium on all 10-year bonds
After year 3, the cash flows will increase by 2% per year forever. What is the NPV of the project if the discount rate is 14%?
You have been very successful in business and it is time to buy the big boat so you can sail the blue seas of the Bedford basin and entertain your friends.
If the firm's required rate of return is 6.31% what should be the current price of share of stock be? Show work out
What would its cost of equity be if it took on the average amount of debt for its industry at a cost of debt of 6.2%??
When conducting a formal hypothesis test, there are different errors that may be made, depending on your decision. One decision is to reject the null hypothesis. If you falsely do not reject the null hypothesis, what type of error has been made?
Fund ABC currently has $125 million in assets, $5 million in liabilities and 5 million shares outstanding. If you bought fund ABC for $20 per share on January 1
At time 0, you have $10,000. Investments A and B are available; their cash flows are shown in the table below: Assume that any money not invested.
In a mass-transfer spray column, a liquid is sprayed into a gas stream, and mass is transferred between the liquid and gas phases.- Arrange these variables in dimensionless groups. Should any other variables have been included?
Draw the opportunity set and your indifference map. Show the optimum amount of consumption in each period.
Compute the weighted-average cost of capital for a firm with the following sources of funds and corresponding required rates of return: $5 million common stock
1. Suppose that the 6-month forward rate for the dollar in terms of the Swiss franc for Wednesday was SF0.9680/$.
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