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A security is currently worth $500 and an investor plans to buy it in a year. The investor is concerned the prices may rise in a year, therefor to hedge this risk, the investor enters into a forward contract to buy (Long) the asset in a year. The discrete risk free rate is 3.5%. (Use A. Calculate the appropriate “no arbitrage” forward contract price at which this investor can contract to buy the asset in one year. B. After 3 months (arbitrary time into the contract), the price of the asset in the market is now $480. Calculate the gain or loss on the forward contract position at this arbitrary time into the contract (assuming the Forward contract negotiated and locked in price at the “no-arbitrage” forward price above). C. At expiration, the price of the asset is $525. Calculate the value of the forwards contract position at expiration. Also, what is the overall gain or loss to the investor on the whole transaction?
Two bonds have 10 years to maturity. Bond A has a coupon rate of 2.45% and a price of 99.805 (% of FV). Bond B has a coupon rate of 5.90% and a price of 105.214 (% of FV). The bonds make semi-annual coupon payments. Which bond is selling at a premium..
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Laurel, Inc., and Hardy Corp. both have 7 percent coupon bonds outstanding, with semiannual interest payments, and both are priced at par value. The Laurel, Inc., bond has six years to maturity, whereas the Hardy Corp. bond has 19 years to maturity. ..
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Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt−equity ratio of .80. It’s considering building a new $50 million manufacturing facility. A new issue of common stock: The flotation ..
Lets talk about personal finances. What is your greatest weakness in managing your own money?
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