Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Chapter 26, Problem 17PS
Summary Introduction
To discuss: Whether the futures are reasonably priced.
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Currently (on June 23) the value of August BIST 30 index futures is 1560 while the spot BIST 30 index has a value of 1512. Given that the current annual interest rate in Turkey is 20% and the annual dividend yield of the BIST 30 index is 4%;
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Chapter 26 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 26 - Vocabulary check Define the following terms: a....Ch. 26 - Prob. 2PSCh. 26 - Prob. 3PSCh. 26 - Futures prices Calculate the value of a six-month...Ch. 26 - Prob. 5PSCh. 26 - Prob. 6PSCh. 26 - Prob. 7PSCh. 26 - Prob. 8PSCh. 26 - Prob. 9PSCh. 26 - Prob. 10PS
Ch. 26 - Hedging You own a 1 million portfolio of aerospace...Ch. 26 - Prob. 12PSCh. 26 - Prob. 13PSCh. 26 - Catastrophe bonds On some catastrophe bonds,...Ch. 26 - Futures contracts List some of the commodity...Ch. 26 - Prob. 16PSCh. 26 - Prob. 17PSCh. 26 - Prob. 18PSCh. 26 - Prob. 20PSCh. 26 - Prob. 21PSCh. 26 - Prob. 22PSCh. 26 - Hedging What is meant by delta () in the context...Ch. 26 - Futures and options A gold-mining firm is...Ch. 26 - Prob. 25PSCh. 26 - Hedging Price changes of two gold-mining stocks...Ch. 26 - Risk management Petrochemical Parfum (PP) is...Ch. 26 - Total return swaps Is a total return swap on a...Ch. 26 - Prob. 30PSCh. 26 - Prob. 31PSCh. 26 - Prob. 32PSCh. 26 - You are a vice president of Rensselaer Advisers...
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- Consider a six-month futures contract on the FTSE 100. Assume the stocks underlying the index provide an annual dividend yield of 6.2% and the value of the index is 6754.5. Calculate the price of the index (to the nearest full index point) if the continuously compounded risk-free interest rate is (i) 6.9% and (ii) 5.arrow_forwardA stock futures contract is priced at $27.18. The stock has a dividend yield of 1.25 percent and the risk-free rate is 2.5 percent. If the futures contract matures in six months, what is the current stock price?arrow_forwardThe June CBOT Treasury bond futures contract has a quoted price of 95'7. If annual interest rates go up by 1.75 percentage point, what is the gain or loss on the futures contract? Round to the nearest whole dollar.arrow_forward
- The one-year futures price on a particular stock - index portfolio is 1,124.91, the stock index currently is 1, 116, the one-year risk-free interest rate is 2.61%, and the year-end dividend that will be paid on a $1,116 investment in the index portfolio is $13.73. By how much is the contract mispriced? future price - parity pricearrow_forwardConsider these futures market data for the June delivery S&P 500 contract, exactly one year from today. The S&P 500 index is at 1,950, and the June maturity contract is at F0 = 1,951.a. If the current interest rate is 2.5%, and the average dividend rate of the stocks in the index is 1.9%, what fraction of the proceeds of stock short sales would need to be available to you to earn arbitrage profits?b. Suppose now that you in fact have access to 90% of the proceeds from a short sale. What is the lower bound on the futures price that rules out arbitrage opportunities?c. By how much does the actual futures price fall below the no-arbitrage bound?d. Formulate the appropriate arbitrage strategy, and calculate the profits to that strategy.arrow_forwardThe ASX200 index is currently sitting at 6458. The risk-free interest rate is 2% per annum. Exactly three months remain before the Nov-19 SPI200 futures contract expires. The SPI200 is quoted at 6410. This futures price implies that the dividend yield on the ASX200 market index is: The futures price tells us nothing about the dividend yield 2.00% 4.98% 2.48% 0.98%arrow_forward
- Suppose the ASX200 Index is currently at 7,406, the expected dividend yield on the index is 2 percent per year, and the risk-free rate is 0.35%. Using the current price of ASX200 futures contracts that expire in six months recommend a program trading strategy for buying or selling the futures?arrow_forwardThe DAX cash price is 15,000, the interest rate or ‘risk-free’ rate is -0.50% and the dividend yield on the DAX index is 2.0% presently. Calculate the bases and expected prices of the 6 and 12-month DAX financial futures contracts.arrow_forwardYou observe the following prices for Treasury securities (per $100 of par value):Maturity Coupon Rate Price6 months 0 $99.011 year 3.5% $100.991.5 years 3.0% $100.30The 18-month theoretical spot rate implied by these price is A: 2.3% B: 2.5% C: 2.8% D: 3.1%arrow_forward
- A non-dividend-paying stock is currently priced at $16.40. The risk-free rate is 3 percent and a futures contract on the stock matures in six months. What price should the futures be?arrow_forwardA futures price is currently 65, its volatility is 22% per annum, and the risk-free interest rate is 5.5% per annum. What is the value of a five-month European put on the futures with a strike price of 60?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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