Business, 30.07.2021 04:30, enthusiastfranklin
The treasurer for Pittsburgh Iron Works wishes to use financial futures to hedge her interest rate exposure. She will sell five Treasury futures contracts at $170,000 per contract. It is July and the contracts must be closed out in December of this year. Long-term interest rates are currently 8.30 percent. If they increase to 10.50 percent, assume the value of the contracts will go down by 15 percent. Also if interest rates do increase by 2.2 percent, assume the firm will have additional interest expense on its business loans and other commitments of $139,000. This expense, of course, will be separate from the futures contracts.
a. What will be the profit or loss on the futures contract if interest rates increase to 10.50 percent by December when the contract is closed out?
b-1. After considering the hedging, what is the net cost to the firm of the increased interest expense of $139,000?
b-2. What percent of this $139,000 cost did the treasurer effectively hedge away? (Input your answer as a percent rounded to 2 decimal places.)
c. Indicate whether there would be a profit or loss on the futures contracts if interest rates went down.
Loss
Profit
Answers: 2
Other questions on the subject: Business
Business, 21.06.2019 17:00, hrijaymadathil
Amarket is said to be equilibrium when quantity demanded is equal to quantity supplied. critically analyse the above statement by giving different types of market
Answers: 2
Business, 22.06.2019 05:10, mariap3504
Responsible for setting the goals and planning for the future as well as leading and controlling the work of others. out the decisions of top management. often responsible for various departments such as the production, marketing, and accounting departments. process or function of planning organizing leading and controlling. the resources arranged in an orderly and functional way to accomplish goals and objectives. the company on track and making sure goals are met. for the daily operations of a business. examples of this are supervisors, office managers, and crew leaders. act or process of creating goals and objectives as well as the strategies to meet them. for the daily operations of a business. examples of this are supervisors, office managers, and crew leaders. how the firm is structured and who is in charge of whom. direction and vision
Answers: 3
Business, 22.06.2019 09:30, Yvette538
The 39 percent and 38 percent tax rates both represent what is called a tax "bubble." suppose the government wanted to lower the upper threshold of the 39 percent marginal tax bracket from $335,000 to $208,000. what would the new 39 percent bubble rate have to be? (do not round intermediate calculations. enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answers: 3
Business, 22.06.2019 14:20, clairajogriggsk
Your uncle borrows $53,000 from the bank at 11 percent interest over the nine-year life of the loan. use appendix d for an approximate answer but calculate your final answer using the formula and financial calculator methods. what equal annual payments must be made to discharge the loan, plus pay the bank its required rate of interest
Answers: 1
Do you know the correct answer?
The treasurer for Pittsburgh Iron Works wishes to use financial futures to hedge her interest rate e...
Questions in other subjects:
Biology, 11.09.2019 00:30
