What transaction should the firm make on first july

Reference no: EM13925962

On July 1, a portfolio manager holds $1 million face value of Treasury bonds, the 11 1/4s maturing in about 29 years. The price is 107 14/32. The bond will need to be sold on August 30. The manager is concerned about rising interest rates and believes a hedge would be appropriate. The September T-bond futures price is 77 15/32. The price sensitivity hedge ratio suggests that the firm should use 13 contracts.

a. What transaction should the firm make on July 1?

b. On August 30, the bond was selling for 101 12/32 and the futures price was 77 5/32. Determine the outcome of the hedge.

Reference no: EM13925962

Questions Cloud

Determine the transaction the firm should conduct on january : Determine the transaction the firm should conduct on January 31 to set up the hedge. On May 31, the APCO bonds were priced at 82 3/4. The September futures price was 76 14/32. Determine the outcome of the hedge.

Endogenous ligand that interacts with a specific site : The efficacy of an agonist is determined in large part by the number of available or "active" receptors with which to bind. TRUE! The Ras-Raf-MAP kinase pathway is activated upon stimulation of receptor tyrosine phosphatases. FALSE! (kinase, Trk-Rs..

Formulation of the capital asset pricing model : Analyze the formulation of the Capital Asset Pricing Model including the definition of the model with identification of each component. Explain how the CAPM development effectively makes use of the diversification as a foundation for the developme..

Financial accounting and prevent fraud : 1. Corporate governance has become increasingly important over the years. The Sarbanes-Oxley (SOX) Act was enacted to improve transparency in financial accounting and to prevent fraud. Which of the following is correct?

What transaction should the firm make on first july : What transaction should the firm make on July 1? On August 30, the bond was selling for 101 12/32 and the futures price was 77 5/32. Determine the outcome of the hedge.

Frequency table with frequency and relative frequency : Make sure your answers are as complete as possible. Show all of your work and reasoning. In particular, when there are calculations involved, you must show how you come up with your answers with critical work and/or necessary tables. Answers that ..

Construct a hedge that will protect against movements : Construct a hedge that will protect against movements in the stock market as a whole. Use the September stock index futures, which is priced at 375.30 on March 1 and which has a $500 multiplier.

What is the alternate hypothesis : We will test to determine if there evidence of an improvement on the final examination, at the 1% significance level. What is the alternate hypothesis?

Describe the four common causes of chronic diseases : Describe the four (4) common causes of chronic diseases. Discuss effective preventive efforts for diabetes that must oc¬cur to yield health benefits

User Account

All Pages