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Eurodollar futures versus FRAs
(a) Suppose in September 2011 we observe that the Eurodollar futures prices for the March 2012, June 2012 and September 2012 contracts are all 98.00. Consider FRAs with these three maturities. Which FRA is likely to have the lowest rate?
(b) Suppose in September 2011, the March 2013 Eurodollar contract is 97.25 and the FRA for this date is quoted at 2.65%. If you are told that the futures price will not move over its life, what trade would you do? How about if you were told the FRA rate would not move?
Show that Lagrangean duality reduces to linear programming duality when g(x) = Ax-b and S = {x | x ≥ 0}.
The Imperial Sugar Company, located in Honolulu, Hawaii has determined that by implementing a new policy in its credit terms, it could potentially increase its NPV from $0.40 per day to $0.50 per day.
A friend says that the tax "generates no excess burden because it does not lead to changes in behaviour." Is this statement true or false? Explain using a simple labour-leisure choice model, and do not forget to make the distinction between substi..
Rramsey tires sells on credit terms of net 45 days, whereas the rest of the industry sells on terms of net 30 days. On annual credit sales of $6 million, Ramsey currently averages 52 days sales in accounts receivable.
you buy 1500 stocks of LOL inc at $35.50 each. what will be your % return be if you sell your shares a year from now at $37.25, if OCD pays an annual per-share dividend of $.50
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Lexus. is considering an investment of $383,000 in an asset with an economiclife of 5 years. The firm estimates that the nominalannual cash revenuesand expenses at the end of the first year will be $263,000 and $88,000
Compton Company uses a predetermined overhead rate in applying overhead to production orders on a labor cost basis in Department A and on a machine-hours basis in Department B.
Suppose in the base year, a typical market basket purchased by an urban family cost $250. In year 1, the same market basket cost $950. What is the consumer price index (CPI) for year 1
What are mergers and acquisitions, why do companies merge and how can a merger occur
A firm will have before-tax cash flows of $3 million. It can invest in equally risky cash flows that earn a before-tax expected rate of return of 14%. - What assumption do you have to make to allow yourself to work with before-tax present values?
Ted Jones, the Surgery Unit Director, is about to choose his strategy for creating a capital expenditure funding proposal for the coming year. Ted's unit needs more room.
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