What is the present value of the futures contract in dollars

Assignment Help Financial Management
Reference no: EM131182632

A Treasury bond futures contract settles at 105'8. a. What is the present value of the futures contract in dollars?A Treasury bond futures contract settles at 105'8.

a. What is the present value of the futures contract in dollars?

b. If the contract settles at 105-8, are current market interest rates higher or lower than the standardized rate on a futures contract? Explain.

c. Calculate the implied annual interest rate on the futures contract?

d. Calculate the new value of the futures contract if interest rates increase by 1 percentage point annually.

e. Calculate your profit or loss if you sold a futures contract at 105-8 and purchased an offsetting contract when rates increased by 1 percentage point annually.

Reference no: EM131182632

Questions Cloud

What is daves current stock price per share : Dave Inc. recently hired you as a consultant to handle project valuation. You have obtained the following information. The firm has 2 million shares of common stock outstanding. The common stock just paid a dividend of $1. What is Dave’s current stoc..
Firm is adhering to goal of financial managemet : Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?
Withdraw each month from your account in real terms : You are planning to save for retirement over the next 30 years. To save for retirement, you will invest $1,150 per month in a stock account in real dollars and $540 per month in a bond account in real dollars. How much can you withdraw each month fro..
Computing your firms weighted average cost of capital : Your manager just finished computing your firm's weighted average cost of capital. He is relieved because he says that he can now use that cost of capital to evaluate all projects that the firm is considering for the next four years. Evaluate that st..
What is the present value of the futures contract in dollars : A Treasury bond futures contract settles at 105'8. a. What is the present value of the futures contract in dollars?A Treasury bond futures contract settles at 105'8. What is the present value of the futures contract in dollars? If the contract settle..
Calculate implied value of warrants attached to each bond : Pierre Imports recently issued two types of bonds. The first issue consisted of 10-year straight debt with a 9 percent annual coupon. The second issue consisted of 10-year bonds with a 8 percent annual coupon and attached warrants. Calculate the impl..
The risky asset and the risk-free asset : You invest $1,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 16% and a standard deviation of 20% and a Treasury bill with a rate of return of 6%. The slope of the capital allocation..
After-tax cost of debt capital : You have been given the following facts and assumptions concerning ABC Corp. at December 31, 2013. Yield to maturity on long term government bond is 5.00%. Yield to maturity on company long term government bond is 7.0%. Existing tax rate stands at 35..
Complete portfolio by combining the risk-free asset : Consider a Treasury bill with a rate of return of 5% and the following risky securities: The investor must develop a complete portfolio by combining the risk-free asset with one of the securities mentioned above. The security the investor should choo..

Reviews

Write a Review

Financial Management Questions & Answers

  Expected and required rates of return

Assume that the risk-free rate is 7% and the market risk premium is 4%. What is the expected return for the overall stock market? What is the required rate of return on a stock with a beta of 1.1?

  Discuss how certain features of bonds

Discuss how certain features (characteristics) of bonds affect their risk and hence return. Also discuss the usefulness and limitations of bonds ratings. How would these factors change your investment strategy when looking at bonds?

  Capital structure that will maximize shareholder wealth

Financial managers want to choose the capital structure that will maximize shareholder wealth. Shareholder wealth can be maximized by maximizing both the value of the firm and WACC. Changes in capital structure benefit stockholders if the value of th..

  Subsequent cash inflows-calculate the payback period

A project has initial costs of $3,000 and subsequent cash inflows of $1350, 775, 875, and 1625. The company's cost of capital is 12%. Calculate the Payback Period for the project.

  Occupancy costs-numerator of the inventory turnover

Exhibit 4.43 presents profitability ratios for Starbucks for fiscals 2010 and 2011. Using the financial statement data in Exhibits 1.26 and 1.27, compute the values of these ratios for fiscal 2012. The income tax rate is 35%. Use cost of sales, inclu..

  Capital-to-assets ratio requirement with risk-based capital

As you know, one of the regulations on banks relates to Capital Adequacy. Compare and contrast the Capital-to-Assets Ratio requirement with Risk-based Capital Ratios. In this connection, also discuss some of the key enhancements prescribed as part of..

  Estimate of the stocks current price

A company currently pays a dividend of $2.25 per share (D0 = $2.25). It is estimated that the company's dividend will grow at a rate of 22% per year for the next 2 years, then at a constant rate of 7% thereafter. The company's stock has a beta of 1.2..

  Considering buying a dividend paying stock

A broker is considering buying a dividend paying stock. The dividend will be paid at the end of the year. The analyst consensus is the stock will worth $36 in one year. The company pays a $2.25 annual dividend and the broker expects 12% rate of retur..

  What is average accounts receivable figure

Skye Flyer, Inc., has weekly credit sales of $18,800, and the average collection period is 51 days. What is the average accounts receivable figure?

  Simple interest on its investment accounts

First Simple Bank pays 8.6 percent simple interest on its investment accounts. If First Complex Bank pays interest on its accounts compounded annually, what rate should the bank set if it wants to match First Simple Bank over an investment horizon of..

  What is the market value of the firm prior to the recap

An all equity business has 100million shares outstanding selling for $20 a share. Management believes that interest rates are unreasonably low and decides to execute a leveraged recapitalization. It will raise $1 billion in debt and repurchase 50 mil..

  Warrior uses the discounted payback method

Warrior Industries is installing new equipment at a cost of $12,000,000. Expected cash flows from this project over the next 5 years will be $2,000,000, $2,000,000, $4,000,000, $6,200,000 and $8,000,000. The company's discount rate for such projects ..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd