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JetBlue will purchase 5,500,000 gallons of jet fuel in 3 month and will hedge with heating oil futures, which are for 42,000 gallons. From historical data σF = 0.0423, σS = 0.0383, and ρ = 0.929. Spot price on jet fuel = $1.99 and F0 on heating oil = $2.09, what is the optimal number of contracts assuming daily settlement?
a. Using futures contract what is the optimal number of contracts to buy or sell?
b. Using forwards contracts what is the optimal number of contracts to buy or sell?
You are applying for a 30-year, fixed-rate (APR 6.50%), monthly-payment-required mortgage loan for a house that sells for $80,000 today. The mortgage bank will ask you for 20% initial down payment (in cash, paid immediately) of the house value, and c..
Terra Networks is planning to buy injection molding machinery costing $180,000. This machinery’s expected useful life is 5 years. They require a minimum rate of return of 8%, and have calculated the following data pertaining to the purchase and opera..
If the business manager deposits $200 in a savings account at the end of each year for twenty years what will be the value of her investment:
Donald Blowshisown Trumpet is an extremely wealthy and successful businessman. Trumpet Airlines is one of his many companies. Trumpet Airlines flies a 100-seat aircraft every day from New York to Washington DC. What is the underage cost? That is, wha..
The hedge ratio of an at-the-money call option on IBM is 0.17. The hedge ratio of an at-the-money put option is ?0.54. What is the hedge ratio of an at-the-money straddle position on IBM? (Negative value should be indicated by a minus sign. Round you..
Assume the net present value method is used to evaluate investment opportunities. A manager is faced with several investments, but only has funding for one investment. Which investment should be chosen? When using the net present value method, if the..
The manager of Green Daisy Inc. is in the process of deciding whether to make or buy carburettors for its power lawn mowers. If Green Daisy decides to manufacture the carburetor, it could utilize one of two manufacturing processes. What is the break-..
Trigen Corp. management will invest cash flows of $1,448,576, $490,668, $256,673, $818,400, $1,239,644, and $1,617,848 in research and development over the next six years. If the appropriate interest rate is 8.28 percent, what is the future value of ..
Assume your cousin purchased five WXO 23 call option contracts at a quoted price of $.34. What is her net gain or loss on this investment if the price of WXO is $28 on the option expiration date?
The Fitness Studio, Inc.'s, 2012 income statement lists the following income and expenses: EBIT = $778,000, interest expense = $190,000, and taxes = $205,800. The firm has no preferred stock outstanding and 100,000 shares of common stock outstanding...
Considering the long-term inflation rate amounts to 3.5% annually, how much money at real purchasing power will you actually have when you retire? How much should you withdraw and spend per year at real purchasing power for your post-retirement life?
Which of the following is true of companies that base their business on the marketing concept?
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