Bundle: Fundamentals of Financial Management, 14th + MindTap Finance, 1 term (6 months) Printed Access Card
14th Edition
ISBN: 9781305777118
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 18, Problem 5P
Summary Introduction
To determine: The implied nominal interest rate and new value of the contract.
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What is the implied nominal interest rate on a 10-year U.S. T-notes ($100,000)futures contract that settled at 103–060? If interest rates increased by 3%, what would bethe contract’s new value?
What is the implied interest rate on a Treasury bond ($100,000) futures contract that settled at 100’160? If interest rates increased by 1%, what wouldbe the contract’s new value?
Assume the Eurodollar futures price at time t0 is 93.83 and the contract expires in 3 months time a. Calculate the 3-month forward rate implied by this price. b. Calculate the repayment amount for bonds with maturities of 3, 6, 9 and 12 months if the investor bought $5 million future contracts.
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Chapter 18 Solutions
Bundle: Fundamentals of Financial Management, 14th + MindTap Finance, 1 term (6 months) Printed Access Card
Ch. 18.A - Prob. 1QCh. 18.A - Prob. 1PCh. 18.A - Prob. 2PCh. 18 - Prob. 1QCh. 18 - Why do options typically sell at prices higher...Ch. 18 - Discuss some of the techniques available to reduce...Ch. 18 - Prob. 4QCh. 18 - Prob. 5QCh. 18 - Give two reasons stockholders might be indifferent...Ch. 18 - OPTIONS A call option on Bedrock Boulders stock...
Ch. 18 - OPTIONS The exercise price on one of Boudreaux...Ch. 18 - OPTIONS Which of the following events are likely...Ch. 18 - BLACK-SCHOLES MODEL Assume that you have been...Ch. 18 - Prob. 5PCh. 18 - Prob. 6PCh. 18 - OPTIONS Audrey is considering an investment in...Ch. 18 - Prob. 8PCh. 18 - BINOMIAL MODEL The current price of a stock is 50....Ch. 18 - Prob. 11IC
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- Assume that today the euro futures contracts with a September 15th delivery date are priced at $1.3680/€ . Suppose that you sold 15 contracts of the euro futures today. If, by September 15th the spot rate is $1.3260/€ , your total profit/loss on your position is (the euro futures contract size is €125,000). $78,750 loss $78,750 gain €78,750 loss €5,250 loss None of the abovarrow_forwardWhat is the implied nominal interest rate on a 6% semiannual 10-year U.S. T-notes ($100,000) futures contract that settled at 102- 280? Do not round intermediate calculations. Round your answer to two decimal places. 94.76 If interest rates increased by 3%, what would be the contract's new value? Enter your answer as a positive value. Use the rounded interest rate calculated above. Do not round any other intermediate calculations. Round your answer to the nearest cent. % $ 51759.24arrow_forwardAssume today’s settlement price on a CME EUR futures contract is $1.3144 per euro. You have a short position in one contract. EUR125,000 is the contract size of one EUR contract. Your performance bond account currently has a balance of $1,900. The next three days’ settlement prices are $1.3130, $1.3137, and $1.3053. Calculate the changes in the performance bond account from daily marking-to-market and the balance of the performance bond account after the third day. Required: Note: Do not round intermediate calculations. Round your answer to 2 decimal places.arrow_forward
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- Suppose that a commodity’s respective forward prices for 1 year and 2 years are $150 and $158. The 1-year effective annual interest rate is 5.9%, and the 2-year interest rate is 6.6%. You will pay a fixed rate of $153.85906 in a 2-year swap and receive the floating rate. At the time you enter the swap contract, its value to you is... A.$0.0084 B.$–0.0084 C.$0.0051 D.. $–0.0051 E.$000000arrow_forwardSuppose you observe the following one-year interest rates, spot exchange rates and futures prices. Futures contracts are available on €10,000. How much risk-free arbitrage profit could you make on one contract at maturity from this mispricing? Exchange Rate Interest Rate APR So($/EL F380(S/E) $1.45 €1.00 is 4% $1.48 = €1.00 3% (Note: If you are unable to view the image shown above, you can download it: interestTable.PNG) O $159.22. O $153.10. $439.42. Onone of the options.arrow_forwardLet’s say a CBOT 10-year U.S. Treasury note futures contract has a quoted price of 103-18. If annual interest rates go up by 1.00 percentage point, what is the gain or loss on the futures contract? (Assume a $1,000 par value, round the new interest rate to 3 decimal places when written as a decimal, and round the change in price up to the nearest whole dollar.)arrow_forward
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