A company plans to borrow $10 million for 90 days, 180 days from today. The type of FRA and the position that the company should take on this FRA to hedge its interest rate risk is most likely: FRA Position A. 3 x 6 long B. 6 x 9 long C. 6 x 3 short
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9. A company plans to borrow $10 million for 90 days, 180 days from today. The type of FRA and the position that the company should take on this FRA to hedge its interest rate risk is most likely: FRA Position
A. 3 x 6 long
B. 6 x 9 long
C. 6 x 3 short
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- 15. A company needs to borrow £10 million for 6 months, 2 months from now. The type of FRA and the position it should take in order to hedge the interest rate risk of such transaction are: A. ‘2-6’ FRA Short position B. ‘2-6’ FRA Long position C. ‘2-8’ FRA Short position D. ‘2-8’ FRA Long positionB. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 2.9 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability Return0.15 -3%0.30 2%0.40 4%0.15 6% The investment's standard deviation is _______ % . round to two decimal places2. It is now January 1, 2x16, and you will need P100,000 on January 1, 2x20. Your bank compounds interest at an 8% annual rate. How much must you deposit today to have a balance of P100,000 on January 1, 2x20? 4. What is the present value of a security that will pay P290,000 in 20 years if securities of equal risk pay 5% annually? 5. What is the future value of a 5%, 5-year ordinary annuity that pays P8,000 each year? If this was an annuity due, what would be its future value?
- A financial institution that invests $50 million into Digicel Fixed Rate 10 year bonds is exposed to which of the following risks? Question 14Answer a. Credit and interest rate risk. b. Liquidity and technology risk. c. Solvency and technology risk. d. Off-balance sheet and interest rate risk.A company's current value of assets is $120 millions and the volatility of the asset value is 10% per annum. The company has issued a debt whose face value is $100 millions and it needs to repay the debt in two years. The risk-free interest rate is 5% per annum. Use a two step binomial tree of the asset value in the following questions. (a) What is the current value of the debt? (b) What is the risk-neutral probability of the company's default on the debt?Mr. Aiman, Treasurer of AJ Finance Berhad, has just completed a Maturity Bucket Analysis based on the a 6-month horizon. (This question requires material discussed in Appendix 1). Month 1 2 3 4 5 6 Total RSA (RM million) 44 168 160 120 144 240 876 RSL (RM million) 52 160 220 120 128 170 850 GAP (RM million) -8 +8 -60 0 +16 +70 +26 a) If the market expectation is increase in interest rates, find the maturity bucket should Mr. Aiman, worries most about. Explain why the particular bucket matters. b) Outline an appropriate hedge strategy for Mr. Aiman,. c) Suppose the following quotes are available. Spot 1-month KLIBOR = 4.0 percent 3-month KLIBOR = 5.0 percent 6-month KLIBOR = 5.5 percent Futures Maturing in 1-month KLIBOR futures = 95.5 3-month KLIBOR futures = 94.0 Maturing in 6-month KLIBOR futures = 93.0 i. Calculate interest rate Mr. Aiman, 'lock-in' using your strategy in (b). ii. Assuming the 3-month KLIBOR…
- If a security currently worth $12,800 will be worth $15,573.16 five years in the future, what is the implied interest rate the investor will earn on the security—assuming that no additional deposits or withdrawals are made? 3.20% 0.24% 1.22% 4.00%Tyson Inc. wants to hedge an account receivable of ¥595 million to be received in six months using a money market hedge. Given a yen borrowing rate of 6% APR how much will Tyson Inc. need to borrow today in order to match the payment it will receive in six months? Question 7 options: ¥577.7 million ¥595 million ¥561.3 million ¥586.2 millionRecall that on a one-year Treasury security the yield is 4.0000% and 5.4000% on a two-year Treasury security. Suppose the one-year security does not have a maturity risk premium, but the two-year security does and it is 0.4%. What is the market’s estimate of the one-year Treasury rate one year from now? (Note: Do not round your intermediate calculations.) 6.8509% 6.0096% 7.6322% 5.1082%
- Suppose tnat ABC bank decides to purchase a T-note and convert it into a STRIP. The T-note has a maturity of 6 years, pays a 6% coupon rate (semiannual) and a face value of $10,000. How many separate securities can be created? O 6O7O 12O13Consider two securities that pay risk-free cash flows over the next two years and that have the current market prices shown here: Security Price Today Cash Flow in One Year Cash Flow in Two Years B1 $192 $200 0 B2 $176 0 $200 What is the no-arbitrage price of a security that pays cash flows of $200 in one year and $200 in two years? What is the no-arbitrage price of a security that pays cash flows of $200 in one year and $1600 in two years? Suppose a security with cash flows of $100 in one year and $200 in two years is trading for a price of $260. What arbitrage opportunity is available?The promised cash flows of three securities are listed below. If the cash flows are risk-free, and the risk-free interest rate is 5.0%, determine the no-arbitrage price of each security before the first cash flow is paid. Security Cash Flow Today ($) Cash Flow in One Year ($) A 800 800 B 0 1600 C 1,600 0 The no-arbitrage price of security A is how much? ? (Round to the nearest cent.) The no-arbitrage price of security B is how much? ? (Round to the nearest cent.) The no-arbitrage price of security C is how much? ? (Round to the nearest cent.)