You are considering investing $10,000 in either U.S. Treasury bills or bank certificates-of-deposits (CDs). Suppose 6-month U.S. Treasury bills and 6-month bank CDs are both yielding 4.50% annually. Both investments are considered “default-risk free.” Which investment should you probably select. Briefly explain.
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- ABC Corporation wishes to raise money by selling a 90-day promissory note in the short-term money markets. The note promises to pay the holder $17,000,000 at maturity. If yields on similar risk notes are currently 2.8% p.a., how much money will ABC Corporation receive for the note? If the purchaser of the note holds it until maturity, what is the total amount of interest they will earn? For the purchaser in 2), what will be the return on investment (ignoring taxes)? Need help answering all these please!Suppose that you are the treasurer of IBM with an extra U.S. $1,000,000 to invest for six months. You are considering the purchase of U.S. T-bills that yield 1.810% (that’s a six month rate, not an annual rate by the way) and have a maturity of 26 weeks. The spot exchange rate is $1.00 = ¥100, and the six month forward rate is $1.00 = ¥110. The interest rate in Japan (on an investment of comparable risk) is 13 percent. What is your strategy?Suppose two firms want to borrow money from a bank for a period of 10 years. Firm A has excellent credit and can borrow at the prime rate, whereas Firm B's credit standing is prime rate plus 2 percent. The current prime rate is 5.75 percent, the 30-year Treasury bond yield is 4.35 percent, the three-month Treasury bill yield is 3.54 percent, and the 10-year Treasury note yield is 4.24 percent. What are the appropriate loan rates for both the firms? 6.45% for Firm A, 7.75% for Firm B 6.45% for Firm A, 8.45% for Firm B 5.75% for Firm A, 8.45% for Firm B None of the above
- Suppose that the cost of borrowing restricted euros is7% annually, whereas the market rate for these funds is12%. If a firm can borrow €10 million of restricted funds,how much will it save annually in before-tax franc interestexpense?A bank offers a corporate client a choice between borrowing cash at 9% per annum and borrowing Bitcoin at -5% per annum. The risk-free interest rate is 3% per annum, and storage costs are 7% per annum. The interest rates on the two loans are expressed with annual compounding. The risk-free interest rate and storage costs are expressed with continuous compounding. Suppose that the price of Bitcoin is $58,000 and the corporate client wants to borrow $1,160,000. Discuss whether the rate of interest on the Bitcoin loan is too high or too low in relation to the rate of interest on the cash loan. What is the correct rate of interest for Bitcoin loan?Suppose that the price of a Treasury bill with90 days to maturity and a $1 million face valueis $980,000. What is the yield on a bankdiscount basis? *Please include work*
- Given $100,000 to invest, what is the expected risk premium in percentage and in dollars of investing in equities versus risk-free T-bills (U.S. Treasury bills) based on the following table?Suppose two firms want to borrow money from a bank for a period of 10 years. Firm A has excellent credit and can borrow at the prime rate, whereas Firm B's credit standing is prime rate plus 2%. The current prime rate is 3.75%, the 30-year Treasury bond yield is 3.54%, the three-month Treasury bill yield is 0.54%, and the 10-year Treasury note yield is 2.24%. What are the appropriate loan rates for both the firms? A. 2.24% for Firm A, 4.24% for Firm B B. 5.45% for Firm A, 7.45% for Firm B C. 3.75% for Firm A, 5.75% for Firm B D. 6.75% for Firm A, 8.75% for Firm BThe Bank of England’s Monetary Policy Committee raised interest rates to 3.5 per cent on December 15, 2022 while governor Bailey declaring that “inflation has reached its peak”. What was the immediate impact of this action on financial markets? You have been given £10 million on December 16 to build an optimal portfolio in current market conditions. What would you be investing on, how much on each financial instrument and why? Explain your strategy in detail. Direct and indirect investment are all allowed. No cryptocurrency.
- A company is due to receive €2,500,000 two-months from today and wishes to save the funds for three months. Money market interest rate spreads for short-term euro transactions are presented in the table below. Money Market Euro Interest Rate Spreads (%) 1 month 2 months 3 months 4 months 5 months 6 months 0.20 - 0.25 0.28– 0.33 0.35 – 0.40 0.45 – 0.56 0.60 – 0.67 0.75 – 0.83 Assume that the company wishes to undertake a money market hedge to fix the future deposit rate. Explain the character of the company’s interest rate risk exposure and calculate the annualised forward interest rate that it can achieve using the current interest rates. Base calculations on months rather than days.Bank A expects the New Zealand dollar (NZ$) is going to appreciate in the next five days from $0.48 to $0.50, and the following annual interest rates are: Currency Lending Rate Borrowing Rate Dollars 7.10% 7.50% New Zealand dollar (NZ$) 6.80% 7.25% Bank A has the capacity to borrow either NZ$10 million or $5 million. If the bank's expectation is correct, the dollar profit can be generated over the five-day period is ___________. A. $134,862 B. $491,225 C. $503,320 D. $208,044Suppose you owned a portfolio consisting of $250,000 of long-term U.S. government bonds.a. Would your portfolio be riskless? Explain.b. Now suppose the portfolio consists of $250,000 of 30-day Treasury bills. Every 30 daysyour bills mature, and you will reinvest the principal ($250,000) in a new batch ofbills. You plan to live on the investment income from your portfolio, and you want tomaintain a constant standard of living. Is the T-bill portfolio truly riskless? Explain.c. What is the least risky security you can think of? Explain.