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As a financial advisor, you have been provided with the following information. Holden, the Australian car manufacturer, must pay a floating rate interest payment 90 days from now. It wants to lock in these interest payments using interest rate futures contracts. Interest rate futures for 90 days from now settled at 96.77, for a yield of 3.23% per annum. The company management has the following requests: i. Should they buy or sell the interest rate futures contract? ii. If the floating interest rate 90 days from now is 3%, would they gain or lose? iii. If the floating interest rate 90 days from now is 3.5%, would they gain or lose? In answering the question above, start with these assumptions: Assumption Value Future price 96.77 Yield 3.23 Notional principal $1,000,000
In August 2001, it was discovered the McDonald’s Monopoly game was a fraud. Simon Marketing, which ran the game on behalf of McDonald’s, was responsible for the fraud. How did the FBI use the surveillance to gather evidence regarding Simon Marketing’..
The company's share price is $12.45, and the company has 301,640 shares outstanding. Compute the firm's price-earnings ratio up to two decimal points.
Metro City exercises its power of eminent domain to acquire land for a public project, including part of a public transit rail system and a traffic bypass. Metro City relocates more than 10,000 residents from the land and destroys their homes to begi..
3 years ago Maxi Min INC issued 30 year to maturity zero coupon bonds with a par value of $1000. Now the bond has a yield to maturity of 9.21 percent compounded semi annually. What is the current price of the bond? Round the answer ro two decimal pla..
Construct Statements of Cash Flows for 20X2 and 20X3.Where is the company's money going to and coming from?Make a comment about their free cash flows during the period.Is it likely to have positive or negative free cash flows in the future?
Mullineaux Corporation has a target capital structure of 60 percent common stock, 15 percent preferred stock, and 25 percent debt. Its cost of equity is 10 percent, the cost of preferred stock is 4 percent, and the pretax cost of debt is 6 percent. W..
Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with a retirement income of $34,000 per month for 20 years, with the first payment received 30 years and 1 month from now.
A company paid a dividend of $0.40 and dividends are paid once a year. Dividends are expected to grow at 4 percent p.a. for each of the next five years and then to remain constant forever. Assume required rate of return of 7 percent p.a., and that di..
Gerentology Associates, a highly profitable company, is considering 2 growth stategies, one that will achieve sales growth of 20% in one year, and the other that will achieve 20% growth in sales but over a 4 year time frame. Assuming they use the per..
A 5.55 percent coupon bond with 14 years left to maturity can be called in five years. The call premium is one year of coupon payments. It is offered for sale at $1,106.30. What is the yield to call of the bond?
Asian Trading Company paid a dividend yesterday of $4 per share. The dividend is expected to grow at a constant rate of 7% per year. The price of Asian Trading Company's stock today is $25 per share. If Asian Trading Company decides to issue new comm..
Yield to maturity and future price. Assume that the yield to maturity remains constant for the next 3 years. What will the price be 3 years from today?
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