FI 516 FM12 Ch 23 P06 Build a Model

FI 516 FM12 Ch 23 P06 Build a Model -...

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535613197234c07682c6a52490235f9e88f9458b.xls Build a Model Michael C. Ehrhardt Page 1 03/06/2011 9/6/2006 Chapter 23. Solution to Ch 23-06 Build a Model Problem 23-6. Use the information and data from Problem 23-5 Problem Inputs: Size of planned debt offering = $10,000,000 Anticipated rate on debt offering = 11% Maturity of planned debt offering = 20 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 Value of each T-bond futures contract = $95,531.25 Number of contracts needed for hedge = 104.68 rounding = 105.00 Value of contracts in hedge = $10,030,781 Implied semi-annual yield = 3.200% Implied annual yield = 6.399% Change in interest rate on debt offering (basis points) = -300 New interest rate on debt = 8.0% Value of issuing at new rate interest = $12,968,916 Dollar value savings or cost from issuing debt at the new rate =
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FI 516 FM12 Ch 23 P06 Build a Model -...

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