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Eurodollar futures versus FRAs
(a) Suppose in September 2011 we observe that the Eurodollar futures prices for the March 2012, June 2012 and September 2012 contracts are all 98.00. Consider FRAs with these three maturities. Which FRA is likely to have the lowest rate?
(b) Suppose in September 2011, the March 2013 Eurodollar contract is 97.25 and the FRA for this date is quoted at 2.65%. If you are told that the futures price will not move over its life, what trade would you do? How about if you were told the FRA rate would not move?
Your analysis tells you that the appropriate discount rates are 10 percent for the cash flows, and 7 percent for the debt. You currently own 10 percent of the stock. How much are your cash flows today
Assume that the bonds are default-free and that there are no taxes. Now assume that Hubbard's issues more debt and uses the proceeds to retire equity. The new financing mix is 35% equity and 65% debt.
The expected lifetime of the various capital items is 10 years for the garbage trucks, 8 years for the bulldozer, 5 years for the lawn mowers, and 40 years for the activity center.
Jiminy Cricket Removal has a profit margin of 9 percent, total asset turnover of 1.15, and ROE of 14.31 percent. What is this firm's debt-equity ratio
Your firm has an average receipt size of $175. A bank has approached you concerning a lockbox service that will decrease your total collection time by one day. You typically receive 5,900 checks per day.
A 30-year maturity bond making annual coupon payments with a coupon rate of 16.0% has duration of 10.55 years and convexity of 161.7. The bond currently sells at a yield to maturity of 9%.
Assume management is unsure about the $110,000 cost savings - this figure could deviate by plus 20%. Calculate the NPV over the five-year period. Calculate the NPV over the five-year period
A 6-year, semiannual coupon bond is selling for $991.38. The bond has a face value of $1,000 and a yield to maturity of 9.19 percent. What is the coupon rate
FarCry Industries, a maker of telecommunications equipment, has 3 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10,000 bonds.
Which of the following is the correct expression for finding the present value of a $500 payment two years from today if the interest rate is 4 percent
Your finance text book sold 47,000 copies in its first year. The publishing company expects the sales to grow at a rate of 19.0 percent for the next three years, and by 6.0 percent in the fourth year.
In discussions with its investment bank, DiPitro's learns that the bankers recommend a gross price of $44 per share and that 70,000 shares of stock be sold. The net proceeds on the stock sale leaves DiPitro's with $2.870 million.
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