Questions from Business Statistics

Q: The December Eurodollar futures contract is quoted as 98.40 and

The December Eurodollar futures contract is quoted as 98.40 and a company plans to borrow $8 million for three months starting in December at LIBOR plus 0.5%. (a) What rate can the company lock in by...

Q: A Eurodollar futures quote for the period between 5.1 and

A Eurodollar futures quote for the period between 5.1 and 5.35 years in the future is 97.1. The standard deviation of the change in the short-term interest rate in one year is 1.4%. Estimate the forwa...

Q: It is March 10, 2017. The cheapest-to-

It is March 10, 2017. The cheapest-to-deliver bond in a December 2017 Treasury bond futures contract is an 8% coupon bond, and delivery is expected to be made on December 31, 2017. Coupon payments on...

Q: Assume that a bank can borrow or lend money at the same

Assume that a bank can borrow or lend money at the same interest rate in the LIBOR market. The 90-day rate is 10% per annum, and the 180-day rate is 10.2% per annum, both expressed with continuous com...

Q: A Canadian company wishes to create a Canadian LIBOR futures contract from

A Canadian company wishes to create a Canadian LIBOR futures contract from a U.S. Eurodollar futures contract and forward contracts on foreign exchange. Using an example, explain how the company shoul...

Q: On June 25, 2017, the futures price for the June

On June 25, 2017, the futures price for the June 2017 bond futures contract is 118-23. (a) Calculate the conversion factor for a bond maturing on January 1, 2033, paying a coupon of 10%. (b) Calculat...

Q: A portfolio manager plans to use a Treasury bond futures contract to

A portfolio manager plans to use a Treasury bond futures contract to hedge a bond portfolio over the next 3 months. The portfolio is worth $100 million and will have a duration of 4.0 years in 3 month...

Q: Company A, a British manufacturer, wishes to borrow U.

Company A, a British manufacturer, wishes to borrow U.S. dollars at a fixed rate of interest. Company B, a U.S. multinational, wishes to borrow sterling at a fixed rate of interest. They have been quo...

Q: Suppose that you own 5,000 shares worth $25 each

Suppose that you own 5,000 shares worth $25 each. How can put options be used to provide you with insurance against a decline in the value of your holding over the next 4 months?

Q: Suppose that the term structure of risk-free interest rates is

Suppose that the term structure of risk-free interest rates is flat in the United States and Australia. The USD interest rate is 7% per annum and the AUD rate is 9% per annum. The current value of the...