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Suppose oil forward prices for 1 year, 2 years, and 3 years are 20, 21, and 22 respectively. Let the 1-year annual effective interest rate be 6%, the 2-year interest rate be 6.5% and the 3-year interest rate be 7%. Suppose you are the fixed-rate payer in the swap. a) Find the forward rate for year two, f1,2
b) Find the forward rate for year three, f2,3
c) Let t = 1. How much have you overpaid or underpaid relative to the forward price after the first swap settlement?
d) Let t = 2. What is the cumulative over payment or underpayment after the second swap settlement? (Be sure to account for interest).
e) Let t = 3. What is the cumulative overpayment or underpayment after the third swap settlement? (Be sure to account for interest).
An article in the Wall Street Journal in 2012 described investors' behavior since 2000 as a "flight safety that has led to a high equity risk at premium". What does "flight to safety" means? In this situation, which types of assets are investors like..
Jeremy Fenloch borrowed some money from his friend and promised to repay him the amounts of $1,290, $1,325, $1,500, $1,630, and $1,575 over the next five years. If the friend normally discounts investments cash flows at 8.50 percent annually, how muc..
The Swiss House is a maker of high quality chocolates. The company is considering opening retail outlets. Mgt feels that retailing involves a different set of risks than it's current production operations and is therefore concerned about using the co..
Which of the following positions are bullish on the market? I. buying a stock II. writing a put III. buying a call IV. selling a call
Consider the following information: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom .17 .352 .452 .332 Good .43 .122 .102 .172 Poor .33 .012 .022 −.052 Bust .07 −.112 −.252 −.092 Requiremen..
Northern Pacific Heating and Cooling Inc. has a 6-month backlog of orders for its patented solar heating system. To meet this demand, management plans to expand production capacity by 50% with a $20 million investment in plant and machinery.
Urban's which is currently operating at full capacity, has sales of $47,000, current assets of $5,100, current liabilities of $6,200, net fixed assets of $51,500, and a 5 percent profit margin. The firm has no long-term debt and does not plan on acqu..
Calculate the? firm's operating cycle and cash conversion cycle. What is the dollar value of inventory held by the? firm?
Governments around the globe have adopted localized regulations and laws pertaining to the reporting of financial statements. However, as a global economy evolves, standardization of these reports is becoming increasingly important.
calculated that your time weighted rate of return for the previous year was 10.3%.
Which one of the following is correct for a firm with $400,000 in net earnings, 50,000 shares, and a 30% payout ratio? A. Retained earnings will increase by $120,000. B. Each share will receive a $1.20 dividend. C. $120,000 will be spent on new inves..
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 25 years to maturity, and a coupon r..
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