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Hedging with Bond Futures
How might a savings and loan association use Treasury bond futures to hedge its fixed-rate mortgage portfolio (assuming that its main source of funds is short-term deposits)?
Explain how prepayments on mortgages can limit the effectiveness of the hedge.
The curse of competitive markets A. May be lessened by obtaining patents for new ideas that protect companies from competitors OR B. Implies that profitable industries will become smaller as companies drop out to avoid competition OR C. Means that mo..
Determine which is the better investment: 6.45% compounded monthly or 6.63% compounded semi annually. The 6.63% semi annually investment gives an effective rate of %.
Suppose there are no government zero-coupon bonds. If investors demand default-free zeros, outline the process that would create these zeros using government coupon paying bonds. Illustrate the method with a case of a four-year, 5 percent government ..
What has occurred with company’s dividend payout, dividend yield, and dividend per share over the past three years? Do you have any explanations for what has occurred? How does your selected company’s dividend payout, dividend yield, and dividend per..
Explain why the JC Penney stores in Mexico and in other foreign markets are subject to financial risk (a subset of country risk).
A donor established a new scholarship that will pay $2,000 every 6 months to a student. The scholarship will be awarded for the first time in December of 2016 (9 months from today). The donor decides that the scholarship should be provided in perpetu..
Assume that interest rate parity holds and that 90-day risk-free securities yield 6% in the United States and 6.3% in Germany. In the spot market, 1 euro equals $1.40 dollar. Is the 90-day forward rate trading at a premium or discount relative to the..
Suppose you are a newly appointed CFO of your chosen health care organization. One of your first tasks is to conduct an internal financial analysis of the organization. Conduct a brief financial analysis and review of the chosen company’s financial s..
Calculate the standard deviations of the following portfolios. 50% in Treasury bills, 50% in stock P. Standard Deviation. Perfect positive correlation
Warner and Augustine Robins, both 33 years old, have been married for 9 years. They live at 638 Russell Parkway, Macon, GA 31207. The Dragon Lady stock is owned 40 percent by Warner, 40 percent by Augustine, and 20 percent by Warner father. Complete ..
A group of nerds perfect a process for converting seawater into crude oil. In order to keep their process off the market, OPEC offers license to process by paying the nerds an annual royalty payment of $100,000,000 starting one year from now, and the..
If you won a 50 million dollar lottery would you take the lump sum amount or twenty five year annuity? Explain why and calculations. Estimated taxes are 30% and the interest rate in 10%. Include reasoning behind the answer.
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