Describe how you would hedge against interest rate risk

Assignment Help Financial Management
Reference no: EM131025851

You wish to sell your $50 million 10-year bond in 6 months from today. Describe how you would hedge against interest rate risk using US treasury bond futures. Illustrate your answer if rates go up and when they go down.

Reference no: EM131025851

Questions Cloud

Do the partners split the first years profits : Sam and Teresa decide to go into business selling discounted merchandise through their web site "e-Buy". They sign a partnership agreement that requires Sam to contribute $12,000 and Teresa to contribute $8,000 in capital to start the firm.
Which of the sets of vectors in p2 are linearly dependent : Show that if {v1, v2, v3} is linearly dependent set of vectors in a vector space V, and v4 is any vector in V, then {v1, v2, v3, v4} is also linear dependent.
What growth rate could supported with no outside financing : You’ve collected the following information about Odyssey, Inc.: Sales $ 205,000 Net income $ 14,200 Dividends $ 9,100 Total debt $ 82,000 Total equity $ 63,000 sustainable growth rate= .0880962789(8.81%)If it does grow at this rate, how much new borr..
Time to maturity-calculate the price of this bond : Microhard has issued a bond with the following characteristics: Par: $1,000 Time to maturity: 5 years Coupon rate: 8 percent Semiannual payments. Calculate the price of this bond if the YTM is:
Describe how you would hedge against interest rate risk : You wish to sell your $50 million 10-year bond in 6 months from today. Describe how you would hedge against interest rate risk using US treasury bond futures. Illustrate your answer if rates go up and when they go down.
What would be the amount of the lease liability : If lessee's fiscal year is the calendar year, what would be the amount of the lease liability that the lessee would report in its balance sheet at the end of the first year?
Define risk-elaborate on the different cases of beta : Define risk. Elaborate on the different cases of beta. Explain the 3 factors which would affect it.
What are dimensionless groups that characterize the problem : If the lift L is a function of the free-stream velocity U∞, density ρ, chord c, angle of attack α, and viscosity ν, what are the dimensionless groups (π parameters) that characterize this problem?
Expects to receive an annual dividend : Shane purchased a stock this morning at a cost of $11 a share. He expects to receive an annual dividend of $.27 a share next year. What will the price of the stock have to be one year from today if Shane is to earn a 15 percent rate of return on this..

Reviews

Write a Review

Financial Management Questions & Answers

  Investment company is instructed to minimize risk

Investment company is instructed to minimize the risk for an investor with $1,200,000 to invest. Stock funds cost $50 with a return of 10%. Money market fund costs $100 and annual return of 4%. Investor wants to earn at least $60,000.

  Consistent with the bird-in-the-hand dividend theory

Which of the following statements would be consistent with the bird-in-the-hand dividend theory?

  What is the equilibrium expected growth rate

Gay Manufacturing is expected to pay a dividend of $1.25 per share at the end of the year (D1 = $1.25). The stock sells for $32.50 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever..

  Estimate the effective cost of the commercial paper

Ralph, treasurer for M and M Products, Inc., recently updated his firm’s short-term cash forecast only to discover that the firm will suffer a cash shortage of $15 million for a period of 30 days. One alternative is to liquidate a portion of his mark..

  About the total cost of college

You figure that the total cost of college will be $100,000 per year 18 years from today. If your discount rate is 8% compounded annually, what is the present value today of four years of college costs starting 18 years from today? (Round to the neare..

  Prepare a loan amortization schedule for bank

Recently you bought a new condominium for $1,600,000, after paying 20% down-payment, you have decided to loan the remainder from a bank. prepare a loan amortization schedule for bank B

  What return should the average investor expect to receive

For the given cash flows below, assume the cash flow is the same in the next 2 years. Compute the NPV for each project, and compute the incremental IRR. Compare and explain why NPV always gives the correct decision. Why should investors who identify ..

  Required return-explain how cost of equity-cost of debt

Explain how cost of equity, cost of debt, WACC, and allowances for various risk factors are involved in determining the "required return" on proposed international capital investments.

  Purchased land-building-equipment from laguna corporation

Mohave Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $919,800. The estimated fair values of the assets are land $175,200, building $642,400, and equipment $233,600. At what amounts should each of the three..

  Contribution margin ratio-net operating income

Maack Corporation's contribution margin ratio is 19% and its fixed monthly expenses are $51,500. If the company's sales for a month are $314,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses ..

  About the future value

Compute the future value in year 9 of a $3,000 deposit in year 1 and another $2,500 deposit at the end of year 5 using a 9 percent interest rate. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

  The financial management of organized health care

Personal thread, please comment on the financial management of organized health care delivery systems.

Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd