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Plush Pilots, Inc., has balance sheet equity of $6.0 million. At the same time, the income statement shows net income of $906,000. The company paid dividends of $480,180 and has 200,000 shares of st
At the same time, the income statement shows net income of $783,000. The company paid dividends of $438,480 and has 100,000 shares of stock outstanding. If the benchmark PE ratio is 18, what is the
If the appropriate discount rate is 10.875 percent, what is the cost in today"s dollars of the equipment Saul purchased today?
If his investment in a mutual fund will earn him 10.3 percent annually, how much will he have saved in eight years when he buys his house?
An investor is long a short-term at-the-money put option on an underlying portfolio of equities with a notional value of USD 100,000. If the 95% VAR of the underlying portfolio is 10.4%, which of th
A rate of 17.5 percent for a seven-year period. The loan calls for a payment of $1,540,862.19 each year beginning today. How much did Grant borrow?
A large, international bank has a trading book whose size depends on the opportunities perceived by its traders. The market risk manager estimates the one-day VAR, at the 95% confidence level, to be
In late 1993, MGRM reported losses of about $1.3 billion in connection with the implementation of a hedging strategy in the oil futures market.
Continuing with the previous question, what is the annualized rate of return earned on a cash-and-carry trade entered into in March and closed out in June?
If the investments are expected to earn 11.5 percent annually, how much will Stephanie have at the end of the seven years?
Imagine a stack-and-roll hedge of monthly commodity deliveries that you continue for the next five years. Assume the hedge ratio is adjusted to take into effect the mistiming of cash flows but is no
As your company's risk manager, you are looking for protection against adverse interest rate changes in five years. Using Black's model for options on futures to price a European swap option (swapti
To hedge against future, unanticipated, and significant increases in borrowing rates, which of the following alternatives offers the greatest flexibility for the borrower?
Groves Corp. is expecting annual cash flows of $225,000, $278,000, $312,500, and $410,000 over the next four years. If it uses a discount rate of 6.25 percent, what is the present value of this ca
Suppose the price for a six-month S&P index futures contract is 552.3. If the risk-free interest rate is 7.5% per year and the dividend yield on the stock index is 4.2% per year, and the market
A currency trader notices that the three-month forward price is USD 0.7350. In order to arbitrage, the trader should
Which of the following statements is correct when comparing the differences between an interest rate swap and a currency swap?
What is the amount and percentage of increase or decrease that would be shown in a balance sheet with horizontal analysis?
The annualized spot rates (with continuous compounding) are 2.00% and 2.50% in yen for one- and two year maturities, and 4.50% and 4.75% in dollars. What is the value of the swap to you in million d
Your company is expecting a major export order from a London-based client. The receivables under the contract are to be billed in GBP, while your reporting currency is USD. Since the order is a larg
A CBO (Collateralized Bond Obligation) consists of several tranches of notes from a repackaging of corporate bonds, ranging from equity to super senior.
A three-year, credit-linked note (CLN) with underlying company Z has a LIBOR + 60bps semi-annual coupon. The face value of the CLN is USD 100. LIBOR is 5% for all maturities. The current three-year
Determine the company's (a) ratio of fixed assets to long-term liabilities and (b) ratio of liabilities to total stockholders' equity.
All else constant, if the default correlations between the individual reference credit names are reduced from 1.0 to 0.7, what is the effect on the relationship between the junior tranche spread Jan
The cap consists of three caplet options with maturities of three months, the first one starting today based on three-month LIBOR set in advance and paid in arrears.