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Question 1: The six month and one-year rates are 3% and 4% per annum with semi-annual compounding. Is 3.90% or 3.95% or 3.99% closest to the one-year par yield expressed with semi-annual compounding?
Question 2: A company enters into a short futures contract to sell 50,000 units of a commodity for 70 cents per unit. The initial margin is $4,000 and the maintenance margin is $3,000. Explain what is the futures price per unit above which there will be a margin call?
Question 3: The spot price of an investment asset is $30 and the risk-free rate for all maturities is 10% with continuous compounding. The asset provides an income of $2 at the end of the first year and at the end of the second year. What is the three-year forward price? (2 mark)
Question 4: On March 1 a commodity's spot price is $60 and its August futures price is $59. On July 1 the spot price is $64 and the August futures price is $63.50. A company entered into futures contracts on March 1 to hedge its purchase of the commodity on July 1. It closed out its position on July 1. What is the effective price (after taking account of hedging) paid by the company?
Discuss the most important challenges of the financial sector. Defend whether you think regulatory changes are imperative. If yes, recommend changes. If no, justify your opinion.
Hart Enterprises recently paid a dividend, D0, of $2.50. It expects to have nonconstant growth of 24% for 2 years followed by a constant rate of 7% thereafter. The firm's required return is 18%.
mr. art deco will be paid 100000 one year hence. this is a nominal flow which he discounts at an 8 nominal discount
Verify your answer using the risk-neutral approach-do not just say that you have the same answer; you will need to show the work that the two approaches give the same answer.
what is a legal agreement also called the deed of trust between the corporation issuing bonds and the bondholders that
Supply and Demand. The economic times in which we live are fascinating for a number of reasons. We have recently seen a recession, heard talk of a "recovery", and lately seen gasoline prices change.
A bond currently sells for $1,050, which gives it a yield to maturity of 6%. Suppose that if the yield increases by 25 basis points, the price of the bond falls to $1,025. What is the duration of this bond?
Prepare an income statement in comparative form, stating each item for both 20Y8 and 20Y7 as a percent of sales. Round to one decimal place.
The right, but not the obligation, to buy or sell an asset at a contractual price on or before a specified date.
Identify what strategic leadership skills are needed for your entrepreneurial venture to take it to the next growth level. How will you evaluate the leaders in your venture to determine if they have the strategic leadership skills needed?
why do bubbles and bursts occur in financial markets? in discussing this issue you need to focus on the rationality of
if a bond lacks a conversion feature 1 - the bond would have a lower coupon 2 - the bond would have a higher coupon 3 -
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