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If a bank invested $55 million in a two-year asset paying 14 percent interest per year and simultaneously issued a $55 million one-year liability paying 12 percent interest per year, what would be the impact on the bank’s net interest income if, at the end of the first year, all interest rates increased by 1 percentage point? (Input the amount as a positive value. Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16))
Net interest income will (Click to select) decreaseincrease by $ million.
Your firm is contemplating the purchase of a new $672,000 computer-based order entry system. The system will be depreciated straight-line to zero over its six-year life. Working capital will revert back to normal at the end of the project. Assume the..
Consider a 1-year (long) strangle on the Nasdaq-100 with strikes of 4,000 and 5,000. The index spot level is 4,655 and its volatility is 20%. The risk-free rate is 4% and the index pays a dividend yield of 2%. Use a 6-step binomial tree to price this..
Conduct a two-stage valuation. You can now combine the two items above to estimate a present value of the firm.
Gardial GreenLights, a manufacturer of energy efficient lighting solutions, has had such success with its new products that it is planning to substantially expand its manufacturing capacity with a $10 million investment in new machinery. How much ext..
Are the two schedules equivalent in terms of present values? Why or why not? - Why is the total sum of interest payments higher for the equal installment schedule?
What effect, if any, might an increase in the rate of return prospects in the stock or bond markets have on market-derived real estate capitalization rates? Can you think of circumstances that might cause a property’s market value to decline faster t..
Gen Corp. is expected to pay a dividend of $2.60 per year indefinitely. The appropriate rate of return on this stock is 12 percent per year, and the stock consistently goes ex-dividend 40 days before dividend payment date. What will be the expected m..
To make stuffed toys, you need fake-fur fabric, filling, and the eyes, plus time on a sewing machine. You currently are making three animals: a spider, an elephant, and a mouse (they all use grey fake-fur). The spider uses 2 square feet of fake fur, ..
Calculate the mid rate for a nine month interest rate bullet swap with quarterly (assume 90 days intervals, and 360 day year) payment against Libor. The following 3 month Eurodollar deposit futures yields apply to contracts expiring (delivery date) a..
Calculate the average return per period for an investor who bought 100 shares of the Closed Fund at the initiation and then sold her position at the end of Period 4.
Rewash Inc., would like to purchase a machine at a cost of $175,000 with a life of 6 years. Their bank is ready to finance 90% of the machine at a rate of 6% per year compounded weekly if Rewash agrees to a payment of $1,300 per month and the remaini..
We know that the market should respond positively to good news and that good-news events such as the coming of the end of a recession can be predicted with at least some accuracy. Why, then, can we not predict that the market will go up as the econom..
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