Clarke plans to satisfy cash needs innine months by selling its Treasurybond holdings for $4 million. However,Clarke is concerned that interest ratesmight increase over the next threemonths. To hedge against thispossibility, Clarke plans to sell Treasurybond futures. Thus, Clarke sellsfutures contract for a price of 99-12.Assuming that the actual price of thefutures contract declined to 97-20,Clarke would make aof $___.from closing out the futures position.a.b.C.d.e.-———40; profit; $76,80040; loss; $76,80050; profit; $70,00040; profit; $70,000none of the above

Future contracts are the contracts to be settled in the future dates and these are used for the…

Clarke plans to satisfy cash needs in nine months by selling its Treasury pond holdings for $4 million. However, Clarke is concerned that interest rates might increase over the next three months. To hedge against this

Clarke plans to satisfy cash needs in nine months by selling its Treasury pond holdings for $4 million. However, Clarke is concerned that interest rates might increase over the next three months. To hedge against this

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Hollywood Shoes would like to maintain their cash account at a minimum level of $67,000, but expect the standard deviation in net daily cash flows to be $5,700; the effective annual rate on marketable securities to be 6.50 percent per year; and the trading cost per sale or purchase of marketable securities to be $270 per transaction. What will be their optimal cash return point? (Round your answer to 2 decimal places.)
You are thinking about investing $4,692 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure, you expect your investment to be worth $5,738 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 8% for the year. What should you do?.
Beyer Company is considering buying an asset for $350,000. It is expected to produce the following net cash flows. Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal places.)
The treasurer of a large corporation wants to invest $12 million in excess short-term cash in a particular money market investment. The prospectus quotes the instrument at a true yield of 6.28 percent; that is, the EAR for this investment is 6.28 percent. However, the treasurer wants to know the money market yield on this instrument to make it comparable to the T-bills and CDs she has already bought. If the term of the instrument is 120 days, what are the bond equivalent and discount yields on this investment? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places. Answer is complete but not entirely correct. Bond equivalent yield Discount yield 6.180 % 0.065 X %
Consider a financial institution with two assets: 10 percent of the portfolio in one-month Treasury bills and 90 percent in real estate loans. If the FI must liquidate its T-bills today, it receives $98 per $100 of face value; if it can wait to liquidate them at maturity (in one month's time), it will receive $100 per $100 of face value. If the DI has to liquidate its real estate loans today, it receives $85 per $100 of face value, and liquidation at the end of one month will produce $93 per $100 of face value. What is the one-month liquidity index value for this FI's asset portfolio? Express your answer in decimals (not in percentage points) and round your answer to the nearest 2nd decimal. Answer:
WOPPERS PLC, which currently has negligible cash holdings, expects to have to make a series of cash payments totalling $3 000 000 over the forthcoming year. These will become due at a steady rate and can be met by making periodic sales from existing holdings of short-term securities. According to the company’s financial advisors, the most likely average percentage rate of return on these securities is 9% over the forthcoming year, although this estimate is highly uncertain. Whenever the company sells securities, it incurs a transaction fee (T) of $50. Calculate the optimal cash balance for the company What is the optimal number of times Welders should sell securities? . Determine the cost of holding cash resulting from this policy.
An investor is considering an investment that will pay $2,170 at the end of each year for the next 10 years. He expects to earn a return of 12 percent on his investment, compounded annually. Required: a. How much should he pay today for the investment? b. How much should he pay if the investment returns are received at the beginning of each year? (For all requirements, do not round intermediate calculations and round your final answers to the nearest whole dollar amount.) a. Present value of ordinary annuity b. Present value of annuity due
Webster runs a $100,000 per month cash deficit,requiring periodic transfers from its portfolio ofmarketable securities. Broker fees are $32 pertransaction, and Webster earns 7% on its investment portfolio. How can Andria use the EOQmodel to determine how Webster should liquidatepart of its portfolio to provide cash?
You are thinking about investing $4,953 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure, you expect your investment to be worth $5,650 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 10% for the year. What should you do? The present value of the return is $ (Round to the nearest cent.)
A new computer system will require an initial outlay of $19,000, but it will increase the firm’s cash flows by $3,800 a year for each of the next 8 years. How high can the discount rate be before you would reject the project? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places
The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next five years: Year 1 $250,000 Annual Cash Flows Year 2 $20,000 Year 3 Year 4 $180,000 $450,000 Year 5 $550,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar?
You are thinking about investing $5000 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure of the outcome, you expect your investment to be worth $5750 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 10% for the year. What should you do? ..... The present value of the return is $ (Round to the nearest cent.)

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS