--%>
Assignment Help - homework help

All rates are stated annually with semiannual compounding

1 Assume the following (all rates are stated annually with semiannual compounding)

a. Six Month Spot Rate is 2%

b. Six Month Forward rate starting at month six is 2.2%

c. Six Month Forward rate starting at month 12 is 2.4%

d. Six Month Forward rate starting at month 18 is 2.5%

Then find the price of a two year treasury note with a coupon rate of 4% 

2 Assume that you purchase a bond with a 5% annual coupon (paid semiannually) and exactly ten years to maturity.The yield is 4.5% (stated annually with semiannual compounding).After six months, the yield of the bond is 4.3%. What is the Total Return for the holding period?


3 Suppose that your trading desk bought $96,000,000 face value of the one-year 5.00% coupon bond.  Assume that the bond is priced at Par.  You want to hedge the interest rate risk with T-Bill futures until you can cover the position by buying in the market place. One T-Bill Futures Contract will pay the long position $25 for every one basis point drop in T-Bill rates. Ignore any possible transactions in the Repo Market.


a. Do you buy or sell contracts?

b. How many contracts would you buy or sell?

   Related Questions in Corporate Finance

  • Q : Leverage ratio problem Handy Inc has

    Handy Inc has debt-to-assets ratio of 40%, tax rate of 35%, and total value of $100 million. W. C. Handy, the CFO, would like to increase the leverage ratio to 42%, and he believes that there will be no change in the bankruptcy cost of the company. How many dollars wo

    		•
  • Q : Public Finance which type of tax,

    which type of tax, direct or indirect is applicable in underdeveloped countries? Why? Show your critical areas and weaknesses.

    		•
  • Q : Briefly describe the financial services

    1 FINANCIAL SERVICES BY BANKS Financial system facilitates the transformation of savings of individuals, government as well as business into investment and consumption. It consists of

    		•
  • Q : Define Economy Impacts Economy Impacts

    Economy Impacts: An upcoming economy is indicated by rise in stock market, as stock market is primary indicator of a economic strength of a country. Progressing economy results in market boom. Yield of companies’ increases on improving economy,

    		•
  • Q : Compute the present value of the

    Is this possible to value companies by computing the present value of the Economic Value Added (EVA)?

    		•
  • Q : Problem on leveraged beta AB

    AB Restaurants has debt/equity ratio .25, and its leveraged beta is 1.5. Its tax rate is 30%, and its cost of equity is 15%. The risk-free rate is 5%. CD Restaurants has debt/equity ratio .4, and tax rate 35%. Find the cost of equity for CD.

    		•
  • Q : Problem on common stock The AB Corp

    The AB Corp stock has a β of 1.15 and it will pay a dividend of $2.50 next year. The expected rate of return of the market is 17% and the current riskless rate is 9%. The expected rate of progress of AB is 4%. Find the value of its common stock.

    		•
  • Q : WCR fend off takeover bid WCR fend off

    WCR fend off takeover bid: The WCR estimation ensures that a firm takes corrective action in time to correct its WC status. This ensures that the firm is always in a positive WC status. In other words, the firm will be able to pay off all its short-te

    		•
  • Q : Define Cash to cash cycle Cash to cash

    Cash to cash cycle: The concept of cash to cash cycle is financial performance standard, which is associated with the management of a firm’s working capital. The definition of cash to cash or cash conversion cycle is “the length of time a

    		•
  • Q : Explain breakthroughs on

    Explain breakthroughs on low-discrepancy sequences.

    		•