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You are a manager of Short Term Capital Management (STCM). You observe that the interest rate on 7 year notes is 5.4 percent, while the interest rate 7.25 year notes is 5.25 percent. You know for sure for sure that the two interest rates will converge in six months to some value X. You also have the ability to go short $500 million face in any note you choose. Given all this, describe your profit making arbitrage strategy. Then graph the amount of money you will make if the interest rate converges to X, X a percentage rate percentage between 3 and 8. Please make sure you don’t have negative returns.
Bennington Industrial Machines issued 137,000 zero coupon bonds six years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.7 percent. What is the price of the bonds? What is the market value of the company's debt? If t..
Suppose the risk-free interest rate is 6.4% APR with monthly compounding. If a $2.1 million MRI machine can be leased for 44 years for $40,000 per month, what residual value must the lessor recover to break even in a perfect market with no risk?
A firm has a long-term debt–equity ratio of 0.55. Shareholders’ equity is $1.4 million. Current assets are $425,000, and total assets are $2.420 million. If the current ratio is 1.7, what is the ratio of debt to total long-term capital?
Suppose an investor is interested in purchasing the following income producing property at a current market price of $450,000.
Expected Return If a company's current stock price is $25.40 and it is likely to pay a $1.15 dividend next year. Since analysts estimate the company will have a 12% growth rate, what is its expected return?
If the only violation of the M&M assumptions is that investors face one tax rate for interest income and another tax rate for equity income, what is the implication for the optimal capital structure of a corporation?
Teakap, Inc., has current assets of $ 1,456,312 and total assets of $4,812,369 for the year ending September 30, 2006. It also has current liabilities of $1,041,012, common equity of $1,500,000, and retained earnings of $1,468,347. How much long-term..
Suppose you know that a company’s stock currently sells for $66 per share and the required return on the stock is 11 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. what ..
The financial analysts at Bearings and Nuts Limited a local conglomerate wants hedge the exposure of a variable interest rate loan it negotiated last year. Due to an uncertain economic environment, the fluctuation of local interest rate might affect ..
Using Spot and Forward Exchange Rates Suppose the spot exchange rate for the Canadian dollar is Can$1.04 and the six-month forward rate is Can$1.06. Which is worth more, a U.S. dollar or a Canadian dollar?
Consider two portfolio with market model regression parameters from the table below (regressions were estimated using excess returns as a dependent variable).
List the kinds of data that might be running along the data flow that comes from the accounts receivable master data to bubble 2.1.
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