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Explain the impact on the implied repo rate of changing from the bid to the offer futures price of the longer dated futures contract ? Assume that on December 2, 2010, the cheapest bond to deliver was the 6 1/4s maturing on August 15, 2028. The March contract is priced at 112, and the conversion factor is 1.0269. The June futures price is 111.75.
The conversion factor for the 6 1/4s delivered on the June contract is 1.0265. The accrued interest on the bond on March 7, the assumed delivery date, is 0.35, and the accrued interest on June 5 is 1.90. There are no coupons between the two futures expiration dates.
Calculate the implied repo rate for the March June 2011 Treasury bond futures spread. If the actual forward repo rate is 4 percent, what do you recommend?
Assume that on 1/1/12 you purchased an investment for $3000. The investment pays you $200 on 12/31 of every year that you hold the security. On 1/1/17 you sell the investment for $3500. What is your rate of return? Round your answer to the nearest te..
What item is not included in the notes to the financial statements? Details about inventory and property, plant and equipment.
What are interest rate fundamentals? Explain term structure and risk premiums. How do these concepts come into play in the real world (mortgage rates, bond prices, etc.)?
The Hamptons Home of a Famed Socialite Hits the Market “Before there was Paris Hilton, there was Consuelo Vanderbilt Balsan – a Gilded Age heiress and socialite, re-nowned for her beauty and wealth. Now Ms. Balsan’s onetime Hamptons home is slated to..
Consider two firms producing smartphones. One uses a highly automated robotics process, while the other uses human workers on an assembly line and pays overtime when there is heavy production demand. Which firm will have higher profits in a recession..
Assume you make the following investment: a $10,000 investment in a 10year T-bond that has a yield of 10.5% and A $20,000 investment in a 10 year corporate bond with an Baa rating and a yield of 13.7%. Based on this information, what is your estimate..
Bayou Okra Farms just paid a dividend of $3.65 on its stock. The growth rate in dividends is expected to be a constant 7 percent per year indefinitely. Investors require a return of 15 percent for the first three years, a return of 13 percent for the..
Does the effect of Russian inflation on the decline in the rouble's value support the PPP theory? How might the relationship be distorted by political conditions in Russia?
You have a portfolio with a beta of 1.65. What will be the new portfolio beta if you keep 91 percent of your money in the old portfolio and 9 percent in a stock with a beta of 0.70?
JJ Industries will pay a regular dividend of $2.40 per share for each of the next four years. At the end of four years, the company will also pay out a liquidating dividend. If the discount rate is 10 percent, and the current share price is $60, what..
It is often desirable to keep life insurance death proceeds out of the insured’s estate for tax reasons. Which of the following describe(s) a necessary condition for keeping the proceeds out of the insured’s gross estate?
Which of the following will increase the cost of equity for a firm with a beta of 1.1?
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