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The multiplier for a futures contract on the stock-market index is $250. The maturity of the contract is one year, the current level of the index is 700, and the risk-free interest rate is 0.5% per month. The dividend yield on the index is 0.2% per month. Suppose that after one month, the stock index is at 708.
a. Find the cash flow from the mark-to-market proceeds on the contract. Assume that the parity condition always holds exactly.
b. Find the one-month holding-period return if the initial margin on the contract is $15,000.
Explain how applying for a ‘Low Doc Loan' could lead the mortgage broker to be accused of recommending an ‘unsuitable' product.
Which one of the following actions will decrease the operating cycle?
Axil Corp. has not tapped the Deutsche mark public debt market because of concern about a likely appreciation of that currency and only wishes to be a floating-rate dollar borrower, which it can be at LIBOR + 1%. What is the maximum possible cost sav..
Select a major industrial or commercial company based in the United States and listed on one of the major stock exchanges in the United States. Each student should select a different company. What is the company's current marginal tax rate? What is t..
You own some equipment that you purchased four years ago at a cost of $287,000. The equipment is five-year property for MACRS. The MACRS rates are .2, .32, .192, .1152, .1152, .0576, for years 1 to 6, respectively. You are considering selling the equ..
How fast were we approaching each other at that instant? (Give your answer to the nearest integer.)
Kevin purchases 100 shares of Coca- Cola at $42.40 a share in January. The company paid a dividend of .25 per share and he sells the stock after a year for $43.00 a share. Calculate Kevin's return. A technology company has total liabilities of $60,00..
Assume N securities. The expected returns on all the securities are equal to 0.01 and the variances of their returns are all equal to 0.01. The covariance’s of the returns between two securities are all equal to 0.005. What value will the variance ap..
Malkin corp has no debt but can borrow at 7 percent. The firm's wacc is currently 11 percent and there is no corporate tax. (a) What is Malkin's cost of equity? (b) If the firm converts to 30 percent debt, what will the cost of equity be? (c) If the ..
A non-dividend-paying stock has a current share price of $58.38 and a futures price of $60.24. If the maturity of the futures contract is four months, what is the risk-free rate?
Great Pumpkin Farms just paid a dividend of $3.40 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely. Investors require a return of 13 percent for the first three years, a return of 11 percent for ..
Suppose that you read in The Wall Street Journal that a bond has a coupon rate of 9 percent, a price of 71.375% (of face value) , and pays interest annually. Rounded to the nearest whole percent, what would be the bond’s “current” yield? Tuttle Enter..
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