Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
The treasurer for Pittsburgh Iron Works wishes to use financial futures to hedge her interest rate exposure. She will sell five Treasury futures contracts at $107,000 per contract. It is July and the contracts must be closed out in December of this year. Long-term interest rates are currently 16.30 percent. If they increase to 17.50 percent, assume the value of the contracts will go down by 15 percent. Also if interest rates do increase by 1.2 percent, assume the firm will have additional interest expense on its business loans and other commitments of $90,000. This expense, of course, will be separate from the futures contracts.
a. What will be the profit or loss on the futures contract if interest rates increase to 17.50 percent by December when the contract is closed out?
b-1. After considering the hedging, what is the net cost to the firm of the increased interest expense of $90,000?
b-2. What percent of this $90,000 cost did the treasurer effectively hedge away? (Input your answer as a percent rounded to 2 decimal places.)
c. Indicate whether there would be a profit or loss on the futures contracts if interest rates went down.
Loss
Profit
The BrightStar Corporation, a solar cell maker, is planning an expansion and needs to raise $22 million to finance it.
An investment that will pay you $2,000 each year for the next 25 years, starting one year after you buy the investment. An investment that will pay $2,000 to you now, and to your heirs (children, grandchildren, any one else) forever Assuming that you..
Being able to translate the information you have in your financial accounting data to help you make management decisions is an important task.
Explain the concept of internal rate of return (IRR) as it is applied to the management of medical projects. Provide a specific example related to your own work or professional interests.
Suppose the real rate is 3.5 percent and the inflation rate is 5.1 percent. What rate would you expect to see on a Treasury bill?
Donna Inc., just paid a dividend of $1.00 and analysts expect the dividend to grow at its compound average growth rate of 10.00% forever.
The real risk-free rate, r*, is 2.6%. Inflation is expected to average 3.3% a year for the next 4 years, What is its default risk premium?
Two costs of construction of a small, remote mine are for labor and transportation. Labor costs are expected to be $120,000 the first year, with inflation of 6% annually for 4 years. If the firm uses inflation free MARR of 7%, calculate the equivalen..
Explain how the following situations can shed light on the question, What is the character of the borrower and quality of information provided? Significant number of Better Business Bureau complaints. The business is a family business and several mem..
When an investment bank underwrites a new security offering it
Determine the current yield - to - maturity (YTM) for a semi-annual bond issued by the Bushnell Corporation if bond's coupon rate is 8.25%,
Risk return theory states that the higher the risk, the higher the required return. The present value of $50,000 to be received 10 years from now at 8% interest is about $23,160. The current share price is $25, most recent dividend is $1.25, so divid..
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!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd