Determine the annualized rate of return

Assignment Help Finance Basics
Reference no: EM132200020

A corporate cash manager who often invests her firm's excess cash in the Eurodollar market is considering the possibility of investing $20 million for 180 days directly in a Eurodollar CD at 6.15 percent. As an alternative, she considers the fact that the 90-day rate is 6 percent and the price of a Eurodollar futures expiring in 90 days is 93.75 (the IMM index). She believes that the combination of the 90-day CD plus the futures contract would be a better way of lending $20 million for 180 days. Suppose she executes this strategy and the rate on 90-day Eurodollar CDs 90 days later is 5.9 percent. Determine the annualized rate of return she earns over 180 days and compare it to the annualized rate of return on the 180-day CD.

Reference no: EM132200020

Questions Cloud

Daily count of items by applying the cycle counting method : Hosulton is a well known corporate incentives and awards manufacturer in Ontario. Calculate the daily count of items by applying the cycle counting method.
Write a main function to call reverse and display the result : Write a function reverse that reverses the sequence of elements in a 1D array. Write a main function to call reverse and display the results.
What is the share price of bbc : The personal income tax rate is 0%. What is the share price of BBC?
What are the advantages to human resources professionals : What are the advantages to Human Resources professionals to using the Internet, Social media, and technology in the process of recruitment?
Determine the annualized rate of return : Determine the annualized rate of return she earns over 180 days and compare it to the annualized rate of return on the 180-day CD.
Solve for the implied dividend yield : Assuming the futures price is equal to its theoretical fair price and the underlying has a continuously compounded dividend yield, solve for the implied
Write a function that moveave that takes two inputs : Write a function that moveAve that takes two inputs: a numerical vector (vecIn) and a number(l) corresponding to the length of the exponential .
Problems facing american workers are numerous and complex : The causes of the problems facing American workers are numerous and complex, and while we can't expect to solve them in our discussion forum,
First contribution will be made after one year : Jane is 30 years old and is saving for her retirement. She is planning on making 35 contributions to her retirement account at the end of each of the next 35

Reviews

Write a Review

Finance Basics Questions & Answers

  How much money will you have available

When payments are made at the beginning of each period, you will treat them as an annuity due You are planning to put $2,750 in the bank at the end of each year

  Process of calculating the models

Identify and recommend at least 1 credible Web site that discusses the process of calculating the models most commonly used to support capital budgeting decisions, and address at least 3 of the following topics:

  Company weighted average cost of capital

What is the company's weighted average cost of capital (WACC)? Express your answer in percentage (without the % sign) and round it to two decimal places.

  Calculate the breakeven index price for a strategy

The $850 strike put premium is $25.45 and the $850 strike call is selling for $30.51. Calculate the breakeven index price for a strategy employing a short call and long put that expires in 6 months. Interest rates are 0.5% per month.

  Lajara inc has provided the following data concerning a

lajara inc. has provided the following data concerning a proposed investment projectinitial investment850000life of the

  What is the minimum rated size of air compressor

A compressed air system consists of a compressor and receiver, 1500 ft (458 m) of 4-in. (1lO.2-cm) pipe, two gate valves, six standard elbows, and a manifold.

  Evaluate the amount of revenue

During 2012, IBM provides consulting services on its mainframe computer for $10,000 on account. The customer does not pay for those services until 2013.

  What is the value of the stock today

The dividend should grow rapidly - at a rate of 27% per year - during Years 4 and 5; but after Year 5, growth should be a constant 6% per year. If the required return on Microtech is 18%, what is the value of the stock today? Round your answer to ..

  What amount would you like spent yearly to fund grand party

What amount would you like spent yearly to fund this grand party? How much money do you have to leave to your heirs 50 years from now assuming that will compound at 6% interest?

  What is the beta estimate from the regressions

FIN330 Interpreting Beta Regressions Assignment. What is the beta estimate from the regressions and what is the standard error? What are the 66% and 95% confidence intervals1 of the beta estimate

  Determine value of the expected first year receipt

We know that Billingsgate Battery Company could alternatively invest its money at a rate of 20 per cent a year. How much do you judge the present (immediate) value of the expected first year receipt of £20,000 to be?

  Calculating the quarterly payment

A student lend $4000 from a credit union toward buying a car. The interest rate on such a loan is 14 percent compounded quarterly, with payments due each quarter.

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