Reference no: EM133074388
Please answer the following questions in detail, provide examples whenever applicable, provide in-text citations.
1. Explain how companies can hedge risks in their operating costs by using each of the following instruments. Hypothetical examples are required.
a. Futures and forward contracts
b. Option contracts
c. Swap contracts
d. Buying one asset and selling another. What is the hedge ratio and how is it determined?
2. The websites of the major commodities exchanges provide futures prices. Calculate the annualized net convenience yield for a commodity of your choice. Retrieve the current risk free rate from the U.S. Government treasury site. (Note: You may need to use the futures price of a contract that is about to mature as your estimate of the current spot price.)
3. You can find spot and futures prices for a variety of equity indexes on www.wsj.com. Pick one and check whether it is fairly priced. You will need to do some research work to find the dividend yield on the index and the interest rate.
4. Define each of the following theories accompanied by equations. Hypothetical examples are required.
a. Interest rate parity.
b. Expectations theory of forward rates.
c. Purchasing power parity.
d. International capital market equilibrium (relationship of real and nominal interest rates in different countries).
|
Rate of return on the retirement account
: You plan on retiring in 15 years. You need $4,000 per month to live after you retire. You have average life expentency of 15 years after your retirement.
|
|
What is the initial investment in the product
: Revenues generated by a new fad product are forecast as follows:
|
|
Calculate the revenue to be recognised by elliot ltd
: Calculate the revenue to be recognised by Elliot Ltd for the year ended 30 June 2021 and prepare the journal entries related to the revenue
|
|
Family health assessment
: What are their strengths and how can they build and develop those strengths so that they can attain their goals - discovering what the problems are
|
|
Find spot-futures prices for variety of equity indexes
: 1. Explain how companies can hedge risks in their operating costs by using each of the following instruments. Hypothetical examples are required.
|
|
What is the average annual rate of return she earned
: Forty years ago, your mother invested $5,000. Today, that investment is worth $430,065.11. What is the average annual rate of return she earned on investment
|
|
Form of equal annual end-of-the-year cash flows
: William wishes to save enough money to purchase a retirement lake cabin. He is willing to spend? $200,000 for the cabin and he can save? $20,000 per year and in
|
|
How much cash will Modern Candy receive when it is paid
: Modem Candy, a wholesaler, sold a crate of candy for $780 on account to a customer with credit terms of 3/20, n/60. How much cash will Modern Candy receive
|
|
What amount of bad debts expense will Gustavo Company report
: What amount of bad debts expense will Gustavo Company report if it uses the direct write-off method of accounting for bad debts
|