Q: Consider a put contract on a T-bond with an exercise
Consider a put contract on a T-bond with an exercise price of 101 12/32. The contract represents $100,000 of bond principal and had a premium of $750. The actual T-bond price falls to 98 16/32 at the...
See AnswerQ: A swap agreement calls for Durbin Industries to pay interest annually based
A swap agreement calls for Durbin Industries to pay interest annually based on a rate of 1.5% over the one-year T-bill rate, currently 6%. In return, Durbin receives interest at a rate of 6% on a fixe...
See AnswerQ: If the pension fund you manage expects to have an inflow of
If the pension fund you manage expects to have an inflow of $120 million six months from now, what forward contract would you seek to enter into to lock in current interest rates?
See AnswerQ: If the portfolio you manage is holding $25 million of 6s
If the portfolio you manage is holding $25 million of 6s of 2032 Treasury bonds with a price of 110, what forward contract would you enter into to hedge the interest-rate risk on these bonds over the...
See AnswerQ: If you buy a $100,000 February Treasury bond contract
If you buy a $100,000 February Treasury bond contract for 108 and the price of the deliverable Treasury bond at the expiration date is 102, what is your profit or loss on the contract?
See AnswerQ: If you buy a put option on a $100,000
If you buy a put option on a $100,000 Treasury bond futures contract with an exercise price of 95 and the price of the Treasury bond is 120 at expiration, is the contract in the money, out of the mone...
See AnswerQ: Suppose that you buy a call option on a $100,
Suppose that you buy a call option on a $100,000 Treasury bond futures contract with an exercise price of 110 for a premium of $1,500. If on expiration the futures contract has a price of 111, what is...
See AnswerQ: I own a professional football team, and I plan to diversify
I own a professional football team, and I plan to diversify by purchasing shares in either a company that owns a pro basketball team or a pharmaceutical company. Which of these two investments is more...
See AnswerQ: If the savings and loan you manage has a gap of -$
If the savings and loan you manage has a gap of -$42 million, describe an interest-rate swap that would eliminate the S&L’s income risk from changes in interest rates.
See AnswerQ: If your company has a payment of 200 million euros due one
If your company has a payment of 200 million euros due one year from now, how would you hedge the foreign exchange risk in this payment with 125,000 euros futures contracts?
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