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Question 1: Stan has sold a futures contract on Treasury bills that specified a price of 97.42. When the settlement date arrived, Stan closed out his position by purchasing a Treasury bills futures contract for 98.39. Ignoring transaction costs, determine Stan's profit or loss.
Question 2: Did Stan anticipate interest rates to increase or decrease when he sold his futures contract? What did he anticipate would happen to T-bill prices?
(B) Assume that American First Bank (AFB) has more rate-sensitive assets (in terms of dollars) than rate-sensitive liabilities.
Question 1: Would AFB be more likely to be adversely affected by an increase or a decrease in interest rates? Explain why.
Question 2: Should AFB purchase or sell interest rate futures contracts in order to hedge its exposure? Explain.
Question 3: Would a long hedge be more appropriate than a short hedge for AFB? Why or why not?
The comic book was originally sold in 1943 for $.10. For this to have been true, what was the annual increase in the value of the comic book?
You currently hold 100 shares of Fletcher. What will be your annual cash flow under the proposed capital structure?
A stock has a required return of 16%; the risk-free rate is 3.5%; and the market risk premium is 6%. What is the stock's beta?
Klingon Widgets, Inc., purchased new cloaking machinery five years ago for $5 million. The machinery can be sold to the Romulans today for $4.1 million. Klingon’s current balance sheet shows net fixed assets of $2.8 million, current liabilities of $7..
Currently, the required return on companies with preferred shares of comparable risk yield 10%.
In one year, promised yields to maturity have risen to 8.00%. What is your holding-period return?
relationship between the percentage change in sales to the percentage change in earnings per share.
In the spot market, 15.4 Mexican pesos can be exchanged for 1 U. S. dollar. If purchasing power parity (PPP) holds, what should be price of same disc in maxico.
Toadies, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $ 1,225 2 1,345 3 1,430 4 1,480 If the discount rate is 9 percent, what is the future value of the cash flows in year 4? Future value $ If the discoun..
An unconventional bond offers a coupon rate of 5% for the first 5 years of the bond and 7% for the remaining 8 years of the bond. Face value is $1,000 and the yield to maturity is 8%. Find bond value, current yield, and capital gains yield this year...
You are a shareholder in a "C" corporation. This corporation earns $5 per share before taxes. After it has paid taxes, it will distribute the remainder of its earnings to you as a dividend. The dividend is income to you, so you will then pay taxes on..
prepare a cash forecast that includes the monthly cash receipts, monthly cash payments, and monthly cash borrowing and loan repayment.
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