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Suppose that your bank buys a T- bill yielding 4 percent that matures in six months and finances the purchase with a three month time deposit paying 3 percent. The purchase price of the T- bill is $ 3 million financed with a $ 3 million deposit.
a. Calculate the six month GAP associated with this transaction. What does this GAP measure indicate about interest rate risk in this transaction?
b. Calculate the three month GAP associated with this transaction. Is this a better GAP measure of the bank's risk? Why or why not?
A project has the following estimated data: price = $66 per unit; variable costs = $43 per unit; fixed costs = $16,500; required return = 8 percent; initial investment = $25,000; life = five years. What is the accounting break-even quantity? What is ..
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.82 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be w..
Quantitative Problem: Barton Industries can issue perpetual preferred stock at a price of $48 per share. The stock would pay a constant annual dividend of $4.30 per share. If the firm's marginal tax rate is 40%, what is the company's cost of preferre..
What is the agency problem between stockholders and managers and describe the data used by the researcher in the analysis.
The company you work for is planning to borrow $58000 at an effective interest rate of 15% per year. The company expects to repay the loan with six equal annual payments at the end of each year, beginning one year after the loan is received. Compute ..
A bank offers a three-month, $100,000 negotiable CD, which will pay a 4.4% annual interest rate. Assume that the market rate on the CD rose to 5% immediately after you purchased the CD, how much its current market value would be.
A portfolio has a standard deviation of 22%. Risk free rate is 3.5%, expected return on market portfolio is 12%, and standard deviation of market portfolio is 25%. What is the required return on the market portfolio?
A SELLER would be responsible for providing all of these items EXCEPT
Today is January 1, 2015. Starting today you plan to invest $2000 every year, first deposit today and last deposit on January 1, 2034. After that, you plan to leave the money in the same account until January 1, 2040. The interest rate is 4% compound..
antitrust laws were essentially created to stop businesses that got too large from blocking competition and abusing
What types of securities are banks prohibited from buying for investment purposes?
A company is considering getting involved in electronic commerce. A modest e-commerce package is available for $29,000. If the company wants to recover cost in 2 years, what is the equivalent amount of new income that must be received every 6 months ..
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