Chp 23

# Chp 23 - What would be the contract's new value? 16/32 =...

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What would be the contract's new value? 16/32 = .5/100 = .005 implied interest rate = .5 Number of bonds = [\$100,000 / \$1,000] Total Number of bonds = 100 bonds If the interest rate increased to 1%, then the Present Value of the bond would be: Present Value = (1+0.005 * \$1,000) = \$1,005 Total Present Value = \$1,005 * 100 bonds = \$100,500 2.9784% 5.96 or 5.96 kd If interest rate increased to 6.9568 (\$897.4842) 89748.42 the value decreased from 100500 to 89748.42

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What are the net payment of carter and brence makes a payment of Libor to Carter? (LIBOR + 2%) 7.95% + 2% = 9.95%. Carter Brence The swap is good for Carter, the rate is less than 10% The swap is good for Brence the rate is less than the issue floating debt rate of 3.1 11% + 7.95% - LIBOR = 3.05%
a. Use the given data to creat a hedge against rising interest rates. Settle price on futures contract (% of par, decimal) = Settle price on futures contract (dollars) = Number of contracts needed for hedge = Value of contracts in hedge =

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## This note was uploaded on 06/18/2011 for the course BUSN 5000 taught by Professor Online during the Spring '10 term at Webster.

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Chp 23 - What would be the contract's new value? 16/32 =...

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