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Suppose company A today enters a contract with company B for delivering 10,000 units of commodity c three months from today. Company A wants to hedge the risk of this position. Unfortunately, there is no futures market for commodity c. There is, however, a futures market for commodity d that includes a futures contract with maturity of three months. Suppose that it is found from historical data that the standard deviation of the commodity-c price is σc = 0.02, the standard deviation of the commodity-d three-month futures price is σd = 0.01, and the correlation between the two is 0.8. Find the hedging strategy with the minimal variance, and compute this minimal variance.
A 7.25% coupon bond with 10 years left to maturity is offered for sale at $1037.20. What yield to maturity is the bond offering? (hint: interest payments are paid semi- annually and par value is $1000) please draw time line and use financial calculat..
Your firm is contemplating the purchase of a new $648,000 computer-based order entry system. The system will be depreciated straight-line to zero over its six-year life. It will be worth $47,000 at the end of that time. Working capital will revert ba..
Midland Utilities has outstanding a bond issue that will mature to its $1,000 par value in 11 years. The bond has a coupon interest rate of 13% and pays interest annually. Find the value of the bond if the required return is? (1)13?%, (2)17?%, and? (..
Calculate the duration of a 4-year, 4 percent coupon bond with a face value of $1000. Assume that the yield on this bond is 5 percent. If the interest rates decrease 10 basis points, what would be the approximate change in the price of the bond usin..
A stock pays an annual dividend of $2. - The price of the stock is $40 per share. At what cost of capital is this stock priced?
The number of victories (W), earned run average (ERA), runs scored (R), batting average (AVG), and on- base percentage (OBP) for each team in the American League in the 2012 season are provided in the following table. The ERA is one measure of the ef..
Revise the following sentences to emphasize the perspective of the audience and the “you” view. To help us avoid fraudulent transactions and suffer potential losses, we encourage our customers to frequently review their accounts and immediately repor..
(A) Please define and explain what is meant by the “Impossible Trinity,” being sure to thoroughly define the relevancy of each facet of the triangle. (B) Please define and explain how the concept of the “Impossible Trinity” applies both to the establ..
A 5.4% bond with 6 months remaining until maturity is currently trading at $1009. Assume semi-annual coupon payments. The firm's tax rate is 38%. The after-tax cost of debt is %.
The spot market involves the almost-immediate purchase or sale of foreign exchange involves the sale of futures, forwards, and options on foreign exchange Takes place only on the floor of a physical trading floor All of the above
The European Union believes that knowledge of foreign languages is an important factor in business today. Discuss the importance of language in business. How will the European Union's program help British business people gain an edge over their rival..
What is the internal rate of return on an investment with the following cash flows? Year Cash Flow
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