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A trader owns gold as part of a long term investment portfolio. The price is $950 per ounce. The trader can borrow and invest funds at 6% with continuous compounding. The storage cost is$3 per ounce, paid at the end of the six months of storage.
If the bid for the futures contract with six months until expiration is equal to $970 while the ask is $972 per ounce, are any arbitrage opportunities?
How would you take advantage of them and what is the maximum expected gain?
Please describe the strategy in detail. Assume that there is no bid-ask spread for spot.
The average gong market interest rate for other companies' debts currently is 10%. If the tax rate is 35%, what is the WACC?
A company called American Banking and Trading has entered into a long forward contract to buy 5 million British pounds at a price of $1.21. The contract has five months to go. The spot rate is currently $1.32. Determine the value of the contract.
Thomson Engineering is issuing new 15-year bonds that have 30 warrants attached. What is the value of each warrant?
Mythic Motors issued 8% coupon bonds that have 5 years to maturity. the bonds make semi-annual payments. If the yield to maturity on these bonds is 6%, what is the current price of the bonds?
The interest rate in the U.K. is 2%, while the interest rate in the U.S. is 1.5%. The spot rate for the British pound is $1.45. According to the international Fisher effect (IFE), what is new level of the British pound?
What is the company's cost of preferred stock for use in calculating the WACC?
What is the duration of a $1 million face value 90-day Treasury bill futures contract?
What is the appropriate yield-to-maturity or discount rate to value Global Motors’ bond issue?
Using the expectations theory, what is the yield on a 1-year bond 1 year from now? Calculate the yield using a geometric average.
Calculate Usher Sports Shop's cash flow from operations for 2015.
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends.
Layla has owned her home for 12 years and expects to live in it for 5 more years. She originally borrowed $200,000 at 5% for 30 years to buy the home. She still owns $130,000 on the loan, interest rates have fallen to 4%, and Layla is reconsidering r..
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