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You own a silver mine in carson city, Nevada. You sign to deliver 10 contracts of silver to the U.S. Mint in Denver, Co. in 6 months. Unsure of whether the U.S. congress will throw the U.S. into default and trigger another recession, you wish to protect your sale proceeds at the current spot price of silver.
a) How do you do this, assuming a middle man will charge you a nominal fee of $1000 for his services? ( show calculations)
b) Four months has gone by, and your mine has "played out"--you can't deliver on your contract. What do you do now?
A lottery winner can take $6 million now or be paid $600,000 at the end of the next 16 years. The winner calculates the internal rate of revenue (IRR) of taking the money at the end of each year and estimating that the discount rate across this perio..
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Jiminy’s Cricket Farm issued a bond with 20 years to maturity and a semiannual coupon rate of 6 percent 2 years ago. The bond currently sells for 92 percent of its face value. The company’s tax rate is 35 percent. What is the pretax cost of debt? Wha..
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Fun Toy Corporation estimates that there is 30% chance of a recession economy next year, a 40% chance of a normal economy next year, and a 30% chance of a boom economy next year. what is the value of Fun Toy’s debt? what is the value of Fun Toy’s equ..
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