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1. Which of the following trades would be least susceptible to counterparty risk?
A Buying a credit default swap
B Taking a short position in an FRA
C Taking a short position in a Eurodollar contract
D Taking a long position in an OTC-traded interest rate cap
2. In 30 days, a corporation needs to borrow $50 million for 60 days and wants to hedge against a possible interest rate increase by entering into a FRA today. The company gets a quote of 4.8% for 60-day LIBOR on a 30-day FRA contract with a notional principal of $50 million. The company proceeds with entering into the FRA, and 30 days when the contract expires, 30-day LIBOR is 4.5% and 60-day LIBOR is 5%.
At settlement, the company:
A pays $16,529.
B collects $16,529.
C pays $24,814.
D collects $24,814.
An investor enters into a long oil futures contract when the futures price is $18.75 per barrel.
At what annual rate did the coin appreciate from its first minting to the 1976 sale? What annual rate did the 1976 buyer earn on his purchase?
If the required reserve is 0.2, the level of deposits is $1,000, the level of currency held by the public is $100, the level of excess reserves is $100, the level of MMF is $1,000 and the level of time deposits is $2,000, then M2 is: Ceteris paribus,..
Describe two methods of project evaluation other than NPV. Discuss the weaknesses of these methods when compared to NPV.
Ratios that focus on the proportion of total assets financed by a firm’s creditors is referred to as: The U.S. tax structure influences a firm’s willingness to finance with debt. The tax structure____________ more debt
The Time Value of Money and Financial Statement Analysis Conducting Financial Ratio Analysis Select a publicly traded U.S. company that has paid a dividend for at least the last three years, and conduct a financial ratio analysis. You will be using t..
Your aunt and uncle (from 9 above) figure that they will need to increase their monthly withdrawals by .25% each month to cover the rising costs of health care, housing and food. Assuming all of the other facts from the previous situation, what is th..
On january 1, 2000, $10500 was deposited into an account that earns 5.06% interest compounded monthly. On January 1, 2007, $2500 was withdrawn from the account and the bank changed the interest rate to 4.79% compounded monthly. If no other deposits, ..
Show that the borrower’s periodic outlay for a standard sinking fund method repayment at rate j is larger than the level outlay under amortization method with the interest rate i, if i > j
Should a U.S. firm finance its investments overseas with funds raised from overseas?
A project has an initial cash outflow of $39,800 and produces cash inflows of $18,304, $19,516, and $14,280 for years 1 through 3, respectively.- What is the NPV at a discount rate of 11 percent?
A stock sells for $50. The next dividend will be $5 per share. If the rate of return earned on reinvested funds is a constant 15% and the company reinvests 20% of earnings in the firm, what must be the discount rate?
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