What is the gain from the future contracts 12 months later

Assignment Help Business Management
Reference no: EM132681716

Your company has a $ 100 million variable rate debt outstanding and you are connected about higher debt payment from rising interest rates over next 12 months. You decide to use Eurodollars future contracts to protect against rising interest rates. The current 12-month Eurodollar future contract interest rate is 1.5% LIBOR. Each contract is $1 million USD.

12 months later, the LIBOR. The LIBOR rate increases to 2%.

Questions:

a. How many contracts you will need to sell to hedge the interest rate risk?

b. What's the gain from the future contracts 12 months later?

c. How much higher interest payment 12 month later?

Reference no: EM132681716

Questions Cloud

How do you model division with fractions : How do you model division with fractions?
Determine the net cash flows of the loan : Margaret Woods Clinic, LLC, is a physician-owned clinic with a marginal tax rate of 30%, is considering borrowing $25 million to finance the construction of new
Compute jocelyn risk aversion coefficient : Jocelyn is indifferent between investing all her wealth (which is $5 million) in the risky asset and the risk-free asset. The risky asset has an expected rate o
Explain semi annual interest means : Can you please explain semi annual interest means?
What is the gain from the future contracts 12 months later : Your company has a $ 100 million variable rate debt outstanding and you are connected about higher debt payment from rising interest rates over next 12 months
Estimate exposure to the exchange risk : You feel that the British economy will experience a boom with a 60 percent probability and a slowdown with a 40 percent probability.
Differentiate between the operational and capital budgets : Educate others regarding the development of an operational budget and a capital budget.
Importance of prospective analysis : For years, two great armies of investors have done battle on Wall Street. In one camp stand growth investors, willing to pay dearly for companies
Market value of the bonds-gillian stationery corporation : Gillian Stationery Corporation needs to raise ?$616,000 to improve its manufacturing plant. It has decided to issue a ?$1,000 par value bond with an annual coup

Reviews

Write a Review

Business Management Questions & Answers

  Examine product proliferation and capacity control

Illustrate the interrelationship among efficiency and economics of scale. Comprise in your essay a discussion of mass customization versus mass production.

  Evaluate ethical implications of decision

Evaluate resources and actions required for implementation. Evaluate ethical implications of a decision. Evaluate decision-making outcomes and processes.

  From society perspective is it better for a market

From society's perspective, is it better for a market to be served by one firm - a price-setting monopoly, or by many small price-taking firms?

  Capital budgeting lecture

View the Capital Budgeting Lecture video, (https://www.youtube.com/watch?v=TrKVj_wLgUc) which provides some factors that should be considered in capital budgeting considerations.

  Sylvia possesses two items of business equipment

Sylvia possesses two items of business equipment. They were both purchased in 2006 for $100,000, both have a seven-year recovery period as well as both have an adjusted basis of $37,490.

  Useful projections for established products-services

Forecasting provides very useful projections for established products-services, but newly introduced products and services have wildly different success results

  What is the amount of information transmitted

Suppose that the variable has standard deviation n and that the true value is transmitted with noise of standard deviation 1.   -What is the amount of information transmitted?

  Some examples of unethical behavior within organization

Discuss What is business ethics? What are some examples of unethical behavior within an organization?

  Why is turnitin a valuable tool for students

Why is Turnitin a valuable tool for students? The DQ response must be 150-200 words and have at least one citation and one reference in APA format.

  Ethical values and those of company

What would you do when faced with a conflict between your ethical values and those of your company? Explain.

  Successful implementation of the assisted living facility

Is this an effective strategy? Ensure the successful implementation of the assisted living facility's strategic plan?

  How does cultural mix and women in the workforce

How does cultural mix and women in the workforce topics relate to one ethical scenario that you have heard about or read about in the news?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd