PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 11, Problem 12PS
Summary Introduction
To determine: Price of the ticket prior to 6 months.
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The following three defense stocks are to be combined into a stock index in January 2019 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance). Assume the index is scaled by a factor of 10 million; that is, if the total value of all firms in the market is $5 billion, the index would be quoted as 500.
Price
Shares(millions)
1/1/19
1/1/20
1/1/21
Douglas McDonnell
210
$
94
$
97
$
111
Dynamics General
450
36
31
45
International Rockwell
350
65
54
68
a. Calculate the initial value of the index if a value-weighting scheme is used. (Round your answer to 2 decimal places.)
b. What is the rate of return on this index for the year ending December 31, 2019? For the year ending December 31, 2020? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Demonstrate how FRAs, BAB futures and interest rate swaps establishes the company's cost of funds for the initial issue of the bills in a bills facility.
For the purposes of your demonstration, assume:
the two-year bill facility uses 90-day BABs with a face value of $1 million;
the facility is being organised in May for commencement in mid June 2022;
when the bill facility was being organised the sune 2022 BAB futures price was 94.45 and the September 2022 BAB futures price was 94.65;
the two-year swap rate in June is 5.45%pa
the 90-day spot rate was 5.35%pa in mid-June (the settlement date for June 2022 futures)
the June FRA rate matches the relevant BAB futures rate
Calculate the simple three-day moving average for the S&P 500 and the exponential three-day moving average where two-thirds of the weight is placed on the most recent close. Why would you want to know the moving average for an index? If the close on April 12, 2019, was below the three-day moving average, would it be a buy or sell signal?
Chapter 11 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 11 - Capital budgeting process True or false? a. The...Ch. 11 - Capital budgeting process Explain how each of the...Ch. 11 - Capital budgeting process Draw up an outline or...Ch. 11 - Prob. 4PSCh. 11 - Biased forecasts Look back to the cash flows for...Ch. 11 - Prob. 6PSCh. 11 - Prob. 7PSCh. 11 - Prob. 8PSCh. 11 - Market prices Suppose the current price of gold is...Ch. 11 - Prob. 10PS
Ch. 11 - Prob. 11PSCh. 11 - Prob. 12PSCh. 11 - Prob. 13PSCh. 11 - Economic rents True or false? a. A firm that earns...Ch. 11 - Prob. 16PSCh. 11 - Economic rents Thanks to acquisition of a key...Ch. 11 - Prob. 18PSCh. 11 - Prob. 19PSCh. 11 - Prob. 20PSCh. 11 - Prob. 21PSCh. 11 - Prob. 22PSCh. 11 - Economic rents Taxes are a cost, and, therefore,...Ch. 11 - Prob. 1MCCh. 11 - Libby Flannery, the regional manager of Ecsy-Cola,...
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