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A corporate cash manager who often invests her firm's excess cash in the Eurodollar market is considering the possibility of investing $20 million for 180 days directly in a Eurodollar CD at 6.15 percent.
As an alternative, she considers the fact that the 90-day rate is 6 percent and the price of a Eurodollar futures expiring in 90 days is 93.75 (the IMM index).
She believes that the combination of the 90-day CD plus the futures contract would be a better way of lending $20 million for 180 days. Suppose she executes this strategy and the rate on 90-day Eurodollar CDs ninety days later is 5.9 percent.
Determine the annualized rate of return she earns over 180 days and compare it to the annualized rate of return on the 180-day CD.
Tara Knowles buys an annuity that will pay her $24,000 a year for 25 years. The payments are paid on the first day of each year. What is the value of this annuity today if the discount rate is 8.5 percent?
With the Canadian dollar quoted as $.9866/ Canadian dollar, how many Canadian dollars does it take to purchase one U.S. dollar? And, with the Euro dollar quoted as $.7688/ EUR , how many Euro dollars does it take to purchase one U.S. dollar?
An investment that has a nominal rate of 6% with semi annual payments will have an effective rate that is smaller than 6%. The present value of a 3-year, $150 ordinary annuity will exceed the present value of a 3-year, $150 annuity due. If a loan has..
The company's cost of capital is 10 percent, and it can get an unlimited amount of capital at that cost. What are the NPVs of both projects? What is the payback period for each? What is the IRR of both projects? Which project would you accept?
Determine the probability that 15 randomly selected jars of this brand of salsa will have a mean weight of less than 660 grams.
XYZ sold a call option on Canadian dollars for $.01 per unit. The strike price was $.76, and the spot rate at the time the option was exercised was $.82. Assume XYZ did not obtain Canadian dollars until the option was exercised. Also assume that ther..
You find a bond with 25 years until maturity that has a coupon rate of 10.0 percent and a yield to maturity of 8.5 percent. Suppose the yield to maturity on the bond increases by .25 percent. What is the new price of the bond using duration?
Suppose you deposit equal payment in your account on January 1 of 2007,2008,2009 assuming an 8% interest rate how large must your payment be to have the same ending balance.
You have decided to buy a small apartment building for $100,000 near a local college. You used $10,000 as a down payment and obtained a mortgage from a local bank for the remaining $90,000. The annual mortgage payment to the bank is $11,500. how much..
A company has just announced a 3-for-1 stock split, effective immediately. Prior to the split, the company had a market value of $5 billion with 100 million shares outstanding. What is the value of the company, the number of shares outstanding, and p..
Under each plan, how high would the government have to set the tax so that it would not expect to lose money on the plan?
A multi-product company's breakup value equals the cash one could realize by splitting the company into two or more independent firms and disposing of each separately. A company becomes a candidate for a takeover when its market value falls below its..
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