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Build_a_model_Ch_23 (version 1)

# Build_a_model_Ch_23 (version 1) - Ch 23-04 Build a Model...

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ffb54d85105dea93a838137f925141da3cf847df.xls Ch 23-04 Build a Model Michael C. Ehrhardt Page 1 07/22/2010 8/3/2003 PLEASE NOTICE EXCEL TUTORIALS WITHIN THE COURSE HOME!! Chapter 23. Ch 23-04 Build a Model Use the information from Problem 23-2, but slightly different: Problem Inputs: Size of planned debt offering = \$20,000,000 Anticipated rate on debt offering = 10% Maturity of planned debt offering = 10 Number of months until debt offering = 7 Settle price on futures contract (% of par) = 95.53125% Maturity of bond underlying futures contract = 20 Coupon rate on bond underlying futures contract = 6% Size of futures contract (dollars) = \$100,000 Number of contracts needed for hedge = 105 Value of contracts in hedge = \$10,015 Implied semi-annual yield = 3.200% Implied annual yield = 6.40% Change in interest rate on debt offering (basis points) = -200 New interest rate on debt = 9.0% Value of issuing at new rate interest = \$11,968,215 Dollar value savings or cost from issuing debt at the new rate = \$1,968,215 New yield on futures contract = 3.40% Value of futures contract at new yield = Dollar change in value of the futures position =

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