Problem set on interest rate hedging

Assignment Help Finance Basics
Reference no: EM132689548

International Finance Problem Set on Interest Rate Hedging:

1. Summa Corp. must pay floating rate interest three months from now on a loan of $1m. It wants to lock in these interest payments with an interest rate futures contract. Interest rate futures for three months from now settled at 94.65, for a yield of 5.35% per annum.

a. Should Summa Corp. buy or sell a futures contract?

b. If the floating-rate interest three months from now is 6.00%, what did Summa gain or lose on the futures contract and on its overall position (loan + futures contract)?

c. If the floating-rate interest three months from now is 5.00%, what did Summa gain or lose on the futures contract and on its overall position (loan + futures contract)?

Reference no: EM132689548

Questions Cloud

Contrasting the political views of two philosophers : The course project requires you to research and write an analytical paper comparing and contrasting the political views of two philosophers
Benefits your organization achieve in obtain certification : From your research, discuss whether or not your organization has ISO 27001 certification. Outside of overall protection from cyber-attacks, describe, in detail.
Utilization management and models of care : Compare and contrast the Chronic Care Model and the Patient-Centered Medical Home Model.
How many calendars must be sold to break even : If the wages decrease to $262.92 per day, and other variables remain the same, how many calendars must be sold to break even?
Problem set on interest rate hedging : Summa Corp. must pay floating rate interest three months from now on a loan of $1m. It wants to lock in these interest payments with an interest rate futures
Discussing electronic innovation and the government : Find a peer-reviewed scholarly journal article discussing electronic innovation and the government. Complete a review of the article by writing a 2-3 page.
Social media in public administration communications : Determine one challenge and one opportunity regarding the use of social media in public administration communications.
Compute the break-even point as a percent of capacity : Compute the break-even point as a percent of capacity. The neighbourhood bookstore sells novels for $17 per unit. The cost to purchase one book is $15.
Standard deviation of portfolio-volusia inc : Volusia Inc is a US based exporting firm that expects to receive paymentsdenominated in both Euros and Canadian Dollars in one month. Based on todaysspot

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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