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The current price of gold is $1,600 per troy ounce. There are no storage costs. The risk free rate of interest is 5% continuously compounded.
(a) What is the forward price of gold with delivery in 3 months?
(b) Calculate the cost of a collar, with 3 months to delivery, where the strike of all options used is 1620.126. The annual standard deviation of the gold price is 20%.
(c) Compare the two hedging strategies based on your answer in (a) and (b).
Assume you just deposited $1,000 into a bank account. The current real interest rate is 3?%, and inflation is expected to be 6?% over the next year. What nominal rate would you require from the bank over the next?year? How much money will you have at..
Deci-Bell, Inc. is producing new headphones, but first management wants to determine its degree of operating leverage. Deci-Bell Inc. has a base level of sales of 325,784 units. Sales price per unit is $151.98 and variable cost per unit is $ $69.78. ..
The percent of sales method does not accurately estimate the balances for lumpy assets. which of the following statements best describes the possible errors?
Year Account balance, beginning of year" "Deposit at beginning of year" "Interest earned during year" "Total in account, end year"
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Which of the following statements regarding universal life insurance is not true?
Suppose that in 2013, Global Conglomerate Corporation (Global) launches an aggressive marketing campaign that boosts sales by 20%. However, their operating margin falls from 5.7% to 4.4% suppose that they have no other income, interest expenses are u..
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Looking at a list of beta coefficients you spot a number of stocks as possible buys for your new stock portfolio. You have $80,000 to invest. You have decided to have just three stocks in your portfolio(this will make it easier to follow than a portf..
When Vivienne and Paul Jensen’s daughter Heather turned sixteen, they signed a form allowing her to get a driver’s license. Two weeks after she received her license, Heather crashed the family car into a tree. He friend Rebecca, who was in the passen..
Your firm is contemplating the purchase of a new $648,000 computer-based order entry system. The system will be depreciated straight-line to zero over its six-year life. It will be worth $47,000 at the end of that time. Working capital will revert ba..
The hospital took out a $2 million mortgage to facilitate the construction of a new sports performance center. The term of the mortgage is 30 years, the annual interest rate is 6.75%, and payment is due on the first day of each month. What is the hos..
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