Currently manage the investment portfolio

Assignment Help Financial Management
Reference no: EM131347802

The year is 2017 and you currently manage the investment portfolio for a large corporation, you currently hold $50 million 5 3/8% Treasury bonds that mature in 2025. You expect interest rates to rise over the next year ad want to hedge your position. If Treasury rates increase by 1% the price will fall 4.75% and if the rate on the Treasury bond futures contract increases by 1% the price will fall 3.5%. Also, when the rate on the Treasury bond futures contract increases by 1% the rate on your treasury will increase by 1.5%. How many contracts should you purchase to hedge your position?

Reference no: EM131347802

Questions Cloud

Solve the general one dimensional chain : Use the same matrix methods we used in class to solve the general one dimensional chain to find the free energy with J ≠ 0, but h = 0. (Do not simply copy the solution and set h equal to zero! Repeat the derivation.)
Pursue a different compensation policy : Should employers cut pay to better compete based on cost, or pursue a different compensation policy (answer with a minimum 150 words)
Mobile workforce instead of a traditional office : What are some arguments used in favor of using a mobile workforce instead of a traditional office work force?
Gains and loses associated with buying put for stock : Draw a graph depicting the gains and loses associated with buying a put for a stock with a $20 strike price and a premium of $2. Calculate the gain or loss associated with 50 shares and a stock price of $25.
Currently manage the investment portfolio : The year is 2017 and you currently manage the investment portfolio for a large corporation, you currently hold $50 million 5 3/8% Treasury bonds that mature in 2025. You expect interest rates to rise over the next year ad want to hedge your position...
Complexity of healthcare delivery : The need for skilled managers within all healthcare settings is increasing due to the complexity of healthcare delivery. In addition, supervisory positions are difficult and demanding. We have either worked or know people who have worked for "good..
What is the gain and loss on the position : You own a put contract on a Treasury bond with a strike price of 101-12. The contract represents $100,000 of bond principal, and had a premium of $750. The actual Treasury bond price falls 98-16 at the expiration. What is the gain/loss on the positio..
Examine the mediums portrayal of sexuality : Complete a web search to find a cartoon or advertisement in the popular media that conveys an image or message related to sexuality and older people - Examine the medium's portrayal of sexuality in older adults by answering the following questions.
What is the gain and loss on this transaction : A hedger takes a short position in five T-Bill futures contracts at the price of 98 5/32. Each contract is for $100,000 principal. When the position is unraveled, the price is 95 12/32. What is the gain/loss on this transaction?

Reviews

Write a Review

Financial Management Questions & Answers

  Considering the purchase of new manufacturing facility

Sanders Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $289,000. The facility is to be fully depreciated on a straight-line basis over seven years. The real discount rate is 6 percent. The corporate tax rate ..

  Find the future value of these cash flows

Phosfranc Inc., is expecting the following cash flows starting at the end of the year—$133,245, $152,709, $161,554, and $200,760. If their opportunity cost is 9.4 percent, find the future value of these cash flows.

  Product is brought to market-firm conduct test marketing

Ang Electronics, Inc., has developed a new DVDR. If the DVDR is successful, the present value of the payoff (when the product is brought to market) is $33.6 million. If the DVDR fails, the present value of the payoff is $11.6 million. Calculate the N..

  Computer-based order entry system

Your firm is contemplating the purchase of a new $575,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $59,000 at the end of that time. You will save $265,000 before..

  Calculate the standard deviation for the investment

Calculate the standard deviation for the investment.

  Budget related to company strategic plan

How is the financial plan and budget related to a company’s strategic plan? How do the various functional departments of an organization use financial planning (i.e. marketing, operations, sales, executive management, finance, etc.)?

  P-E ratio remained unchanged

Kellogg Co. (K) recently earned a profit of $3.82 earnings per share and has a P/E ratio of 20.15. The dividend has been growing at a 4 percent rate over the past few years. If this growth rate continues, what would be the stock price in six years if..

  Compute the call price and put price

Suppose the spot exchange rate for Narnianly currency is trading for $2/N and one year later it can go up to $2.5/N, an increase of 25 percent, or down to $1.80/N, a decrease of 10 percent. assume intiallly that the U.S. interest rate is 1 percent an..

  How much long term debt does blackwell automotive have

TIm Dye the CFO of Blackwell Aoutomotive, is putting together this year's financial statements. He has gathered the following Balance Sheet information: HOW MUCH LONG TERM DEBT DOES BLACKWELL AUTOMOTIVE HAVE?

  Prepare gulings statement of cash flows for the year end

Construct a statement of cash flows.- Prepare Guling's statement of cash flows for the year ended December 31, 2014, complete with its proper heading.

  Excess of the number of free transactions

Pelican Point Financial Group’s clientele consists of two types of investors. The first type of investor makes many transactions in a given year and has a net worth of over $1.5 million. These investors seek unlimited access to investment consultants..

  The annual demand for a product

The annual demand for a product is 1,500 units. The company orders 250 units each time an order is placed. The lead-time is 15 days, and the company has determined that 100 units should be held as a safety stock. There are 250 working days per year. ..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd