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On January 1, a firm takes out a loan of $100 million, with interest payments to be made on April 1, July 1, October 1, and the following January 1, when the principal will be repaid. Interest will be paid at LIBOR. The firm wants to buy a cap with an exercise rate of 4% and a premium of $50,000 but is concerned about the cost. Its bank suggests that the firm sell a floor with an exercise rate of 3% for the same premium. The current LIBOR is 4%. Determine the firm’s cash flows on the loan if LIBOR turns out to be 4.5% on April 1, 5% on July 1, 3.5% percent on October 1, and 4.2% the following January 1. Assume 90 days between interest payments, and use a 360-day year convention. Show work.
An optometrist sells custom-ordered eyeglasses. Assume the optometrist maintains no stock of lenses or frames (except for some sample frames to show customers), but custom orders everything from a manufacturer.
what is the standard deviation of the? stock? The standard deviation of the stock is nothing.
The common stock of bouncy bob is selling for $33.84. the stock recently paid dividends of $3 per share and has a projected constant growth rate of 8.5%. If you purchase the stock at the market price, what is your expected rate of return?
Will the value of the option be larger or smaller if the volatility of the underlying asset is higher than otherwise?
Construct a bond that would immunise this target liability. Compute and verify your strategy indeed immunised the liability when the market interest rates are 3%, 6% and 9%.
Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $28,500 per month for 25 years, with the first payment received 30 years and 1 month from now. S
The risk-free rate equals 7%, and the expected risk premium on the market portfolio equals 7%. What is the firm's WACC? What is the beta of the firm's assets?
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments.
Spontaneous sources of funds refer to all of the below EXCEPT:
A portfolio is comprised of two stocks, C and D. The expected return of the portfolio is 12%, the expected return of the market is 10%, and the risk free rate is 1.5%.Stock C’s beta is 1.2 and Stock D's beta is 0.9. What are the weightings of Stocks ..
Shany market recorded the following events involving a recent purchase of inventory
Calculate your annual shareholder return for each of the two years you owned the stock. Calculate your annual average compound return.
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