Estimate the forward interest rate in an fra

Assignment Help Financial Management
Reference no: EM131236052

1. A Eurodollar futures quote for the period between 5.1 and 5.35 years in the future is 97.1. The standard deviation of the change in the short-term interest rate in one year is 1.4%. Estimate the forward interest rate in an FRA.

2. It is March 10, 2011. The cheapest-to-deliver bond in a December 2011 Treasury bond futures contract is an 8% coupon bond, and delivery is expected to be made on December 31, 2011. Coupon payments on the bond are made on March 1 and September 1 each year. The rate of interest with continuous compounding is 5% per annum for all maturities. The conversion factor for the bond is 1.2191. The current quoted bond price is $137. Calculate the quoted futures price for the contract.

Reference no: EM131236052

Questions Cloud

Explain the difference between errors faults and failures : Explain the difference between errors, faults, and failures. Give an example of an error that leads to a fault in the requirements; the design; the code. Give an example of a fault in the requirements that leads to a failure; a fault in the design..
Write about a small town volunteer ems : I need a 250 word nomintation essay. It will be about a small town volunteer EMS (emergency medical system) that went to a paid program after joining the hospital district
What is the final settlement price on the futures contracts : What rate can the company lock in by using the Eurodollar futures contract? -  What position should the company take in the contracts?
Proportion of the workers earn : The distribution of the monthly earnings of workers in the mining industryin Canada is bell shaped and fairly symmetrical with mean 3840CAD and a standard deviation of 240 CAD. Approximately, what proportion of the workers earn between 3360 CAD to..
Estimate the forward interest rate in an fra : A Eurodollar futures quote for the period between 5.1 and 5.35 years in the future is 97.1. The standard deviation of the change in the short-term interest rate in one year is 1.4%. - Estimate the forward interest rate in an FRA.
Explain factor that affect demand and prices of that product : Define the type of market in which your selected product will compete, along with an analysis of competitors and customers. Analyze any comparative advantages and international trade opportunities.
Deliver flowers and flower arrangements in the greenville : Keith's Florists has 16 delivery trucks, used mainly to deliver flowers and flower arrangements in the Greenville, South Carolina, area. Of these 16 trucks, 7 have brake problems. A sample of 6 trucks is randomly selected. What is the probability ..
What arbitrage opportunities are open to the bank : The Eurodollar futures price for a contract maturing in 91 days is quoted as 89.5. What arbitrage opportunities are open to the bank?
Draw a conclusion concerning the overall test : PSY248 Assignment - Draw a conclusion concerning the overall test and Interpret and draw conclusions about the results of the analysis you have performed, making explicit the decision rule you are using.

Reviews

Write a Review

Financial Management Questions & Answers

  Capital budgeting analysisthe sl energy group is planning a

capital budgeting analysisthe sl energy group is planning a new investment project which is expected to yield cash

  Document supersedes all oral promises relating to the sale

In a transaction for the sale of an auto painting facility, Bright Auto Colors Company tells Custom Cars Corporation that the paints and other supplies on-site are included. The contract says nothing about the supplies on-site, but does state, “This ..

  What is the intrinsic value

Coca-Cola currently has a stock price of $53.75. It also has eight options available with the following Expiration Date, Strike Price (Exercise Price), and Option Price. For Example, you can buy a Feb 55 Call for $3.6 (or you could sell it for $3.6)...

  What is the expected return on the market

The stock of Alpha Company has an expected return of 16.25% and a beta of 1.35, and Gamma Company stock has an expected return of 10.50% and a beta of X. The beta of a portfolio P is 1.05. The portfolio P consists of 40% of the investment in Alpha an..

  What is the average accounting return

A project has an initial cost of $62,000 and a four year life. The company uses straight line depreciation to a book value of zero over the life of the project. The projected net income from the project is $2,400, $4,100, $4,700, and $4,500 a year fo..

  Using net present value when evaluating projects

Green Landscaping, Inc. is using net present value (NPV) when evaluating projects. Green Landscaping’s cost of capital is 10.97 percent. What is the NPV of a project if the initial costs are $1,466,210 and the project life is estimated as 10 years? T..

  Maturity treasury securities-plot the resulting yield curve

Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1 = 1%, E(2r1) = 4.10%, E(3r1) = 4.60%, E(4r1) = 6.10% Using the unbiase..

  Tax sheltered retirement account with the employer matching

If an individual employee, age 25, earning $45,000 per year has an opportunity to participate in an employer sponsored 401(k) tax sheltered retirement account with the employer matching the first $1,200 of annual contributions made by the employee,

  How much interest will you save if you refinance your loan

FreddieMac reports that the average rate on a 30-year fixed rate mortgage is 3.92% as of January 2012. This is down from 4.76% in January 2011 and 5.03% in January 2010. If you have a $224,000, 5%, 30-year mortgage, how much interest will you save if..

  Indicate which asset exhibits the greatest credit risk

In each pair below, indicate which asset exhibits the greatest credit risk. Describe why. a. Commercial loan to a Fortune 500 company or a loan to a corner grocery store b. Commercial loans to two businesses in the same industry; one is collateralize..

  Explain the emergency fund goals

How long would it take her to achieve the emergency fund goal above if she currently has $18,500 saved, invests $300 per month, and earns an annual percentage yield or APY of 4.25% after taxes in her money market mutual fund.

  What would a lifetime free subscription to one starbucks

If the bank's quoted interest rate is 6% per annum, compounded daily, and if the Starbucks price never changed, what would a lifetime free subscription to one Starbucks coffee per day be worth today.

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