Questions from Business Statistics

Q: On January 31, a firm learns that it will have additional

On January 31, a firm learns that it will have additional funds available on May 31. It will use the funds to purchase $5,000,000 par value of the APCO 9 1/2 percent bonds maturing in about 21 years....

Q: An interest rate swap has two primary risks associated with it.

An interest rate swap has two primary risks associated with it. Identify and explain each risk.

Q: Suppose a trader has entered two $50 million notional amount interest

Suppose a trader has entered two $50 million notional amount interest rate swaps both with a fixed rate of 3 percent, paid quarterly on the basis of 90 days in the quarter and 360 days in the year. Th...

Q: Suppose a trader has entered two $15 million notional amount equity

Suppose a trader has entered two $15 million notional amount equity swaps both with a fixed rate of 6 percent, paid quarterly on the basis of 90 days in the quarter and 360 days in the year. The first...

Q: Suppose you are a municipal finance director for a large metropolitan city

Suppose you are a municipal finance director for a large metropolitan city. Based on your asset-liability analysis, you determine that your rate-sensitive assets are equivalent to a one-year LIBOR dep...

Q: The U.K. manager of an international bond portfolio would

The U.K. manager of an international bond portfolio would like to synthetically sell a large position in a French government bond, denominated in euros. The bond is selling at its par value of €46.15...

Q: The CEO of a large corporation holds a position of 25 million

The CEO of a large corporation holds a position of 25 million shares in her company’s stock, which is currently priced at $20 and pays no dividends. She is concerned that because of her large sharehol...

Q: A corporation enters into a $35 million notional amount interest rate

A corporation enters into a $35 million notional amount interest rate swap. The swap calls for the corporation to pay a fixed rate and receive a floating rate of LIBOR. The payments will be made every...

Q: Solve for the price of a forward contract on a generic asset

Solve for the price of a forward contract on a generic asset that expires on September 10 whose spot price as of June 10 is $45, assuming that the annually compounded risk-free rate is 6.01 percent.

Q: Consider a $100 million equity swap with semiannual payments. When

Consider a $100 million equity swap with semiannual payments. When the swap is established, the underlying stock is at 1,215.52. One party pays a fixed rate of 5.5 percent based on the assumption of 3...