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Suppose that your bank currently operates with a DGAP of 2.2 years. Which of the following will serve to reduce the bank's interest rate risk?
a. Issue a one year zero coupon CD to a customer and use the proceeds to buy a three year zero coupon Treasury bond.
b. Sell $ 5 million in one year bullet (single payment) loans and buy three month Treasury bills.
c. Obtain two year funding from the Federal Home Loan Bank and lend the proceeds overnight in the federal funds market.
Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. You estimate that a passive portfolio invested to mimic the S&P 500 stock index yields an expected rate of return ..
on 1 march 2013 zentique inc. reported its financial results an extract of the 2012 balance sheet is shown belowin
A bond for Firebird, Inc. has a coupon rate of 7% and face value of K1000, 000. The yield to maturity is 6.8%. The bond has a remaining life of 30 years and makes annual coupon payments? What is this bond's current market value?
The Japanese supplier has agreed to give Jenkins payment terms of net 90. The Japanese firm insists that payments be made in yen. The current exchange rate between the dollar and the yen is 108 yen per dollar. The 3-month forward exchange rate is 105..
Hadley wants to retire in 15 years, and he wants to have an annuity of $50,000 a year for 10 years after retirement. Hadley wants to receive the first annuity payment the day he retires. Using an interest rate of 8%, how much must Hadley invest today..
It is estimated that the annual sales of an energy saving device will be 25,000 the first year and increase by 10,000 per year until 55,000 units are sold during the fourth year. In the fifth year and each year thereafter the sales will decrease by 5..
Phillips Equipment has 75,000 bonds outstanding that are selling at par. Bonds with similar characteristics are yielding 7.5 percent. The company also has 750,000 shares of 6 percent preferred stock and 2.5 million shares of common stock outstanding...
Explain the difference between and give examples of a financial merger and an operating merger and explain the difference and offer an example of each - a joint venture and a merger.
Calculate the annual cash flows (annuity payments) from a fixed-payment annuity if the present value of the 20-year annuity is $1.8 million and the annuity earns a guaranteed annual return of 10 percent. The payments are to begin at the end of five y..
You have $44,524.78 in a brokerage account, and you plan to deposit an additional $4,000 at the end of every future year until your account totals $270,000. You expect to earn 12% annually on the account. How many years will it take to reach your goa..
Buying Stock with a Market Order You would like to buy shares of Ralph Lauren (RL). The current bid and ask quotes are $85.18 and $85.30, respectively. You place a market buy-order for 500 shares that executes at these quoted prices. How much money d..
The Joseph Company has a stock issue that pays a fixed dividend of $3.00 per share annually. Investors believe the nominal risk-free rate is 4 percent and that this stock should have a risk premium of 6 percent. What should be the value of this stock..
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