Questions from Corporate Finance

Q: Is a total return swap on a bond the same as a

Is a total return swap on a bond the same as a credit default swap? Why or why not?

Q: Yesterday you sold six-month futures on the German DAX stock

Yesterday you sold six-month futures on the German DAX stock market index at a price of 9,120. Today the DAX closed at 9,100 and DAX futures closed at 9,140. You get a call from your broker, who remin...

Q: “Speculators want futures contracts to be incorrectly priced; hedgers want

“Speculators want futures contracts to be incorrectly priced; hedgers want them to be correctly priced.” Why?

Q: Your investment bank has an investment of $100 million in the

Your investment bank has an investment of $100 million in the stock of the Swiss Roll Corporation and a short position in the stock of the Frankfurter Sausage Company. Here is the recent price history...

Q: Phillip’s Screwdriver Company has borrowed $20 million from a bank at

Phillip’s Screwdriver Company has borrowed $20 million from a bank at a floating interest rate of 2 percentage points above three-month Treasury bills, which now yield 5%. Assume that interest payment...

Q: An importer in the United States is due to take delivery of

An importer in the United States is due to take delivery of clothing from Mexico in six months. The price is fixed in Mexican pesos. Which of the following transactions could eliminate the importer’s...

Q: Suppose that in 2023 one- and two-year interest rates

Suppose that in 2023 one- and two-year interest rates are 5.2% in the United States and 1.0% in Japan. The spot exchange rate is ¥120.22/$. Suppose that one year later interest rates are 3% in both co...

Q: It is the year 2021 and Pork Barrels Inc. is considering

It is the year 2021 and Pork Barrels Inc. is considering construction of a new barrel plant in Spain. The forecasted cash flows in millions of euros are as follows: The spot exchange rate is $1.2&Acir...

Q: Why are pyramids common in many countries but not in the United

Why are pyramids common in many countries but not in the United States or United Kingdom?

Q: Table 27.1 shows the 90-day forward rate on

Table 27.1 shows the 90-day forward rate on the South African rand. a. Is the dollar at a forward discount or premium on the rand? b. What is the annual percentage discount or premium?...