Questions from Business Statistics

Q: Explain how an interest rate swap is a special case of a

Explain how an interest rate swap is a special case of a currency swap.

Q: A bank currently holds a loan with a principal of $12

A bank currently holds a loan with a principal of $12 million. The loan generates quarterly interest payments at a rate of LIBOR plus 300 basis points, with the payments made on the 15th of February,...

Q: Suppose that you wish to buy stock and protect yourself against a

Suppose that you wish to buy stock and protect yourself against a downside movement in its price. You consider both a covered call and a protective put. What factors will affect your decision?

Q: Explain how the Black model, which is designed for pricing options

Explain how the Black model, which is designed for pricing options on futures contracts, can be used for pricing interest rate options.

Q: Explain the implied repo rate on a U.S. Treasury

Explain the implied repo rate on a U.S. Treasury bond futures spread position.

Q: The crude oil futures contract on the New York Mercantile Exchange covers

The crude oil futures contract on the New York Mercantile Exchange covers 1,000 barrels of crude oil. The contract is quoted in dollars and cents per barrel (e.g., $27.42), and the minimum price chang...

Q: The following term structure of LIBOR is given. /

The following term structure of LIBOR is given. a. Find the rate on a new 6 9 FRA. b. Consider an FRA that was established previously at a rate of 5.2 percent with a notional amount of $30 million....

Q: You are the treasurer of a firm that will need to borrow

You are the treasurer of a firm that will need to borrow $10 million at LIBOR plus 2.5 points in 45 days. The loan will have a maturity of 180 days, at which time all the interest and principal will b...

Q: A large, multinational bank has committed to lend a firm $

A large, multinational bank has committed to lend a firm $25 million in 30 days at LIBOR plus 100 bps. The loan will have a maturity of 90 days, at which time the principal and all interest will be re...

Q: As the assistant treasurer of a large corporation, your job is

As the assistant treasurer of a large corporation, your job is to look for ways your company can lock in its cost of borrowing in the financial markets. The date is June 28. Your firm is taking out a...