P17-1. (Debt Securities) 2 Presented below is an amortization schedule related to Spangler Company’s 5-year‚ $100‚000 bond with a 7% interest rate and a 5% yield‚ purchased on December 31‚ 2012‚ for $108‚660. Date Cash Received Interest Revenue Bond Premium Amortization Carrying Amount of Bonds 12/31/12 $108‚660 12/31/13 $7‚000 $5‚433 $1‚567 107‚093 12/31/14 7‚000 5‚354 1‚646 105‚447 12/31/15 7‚000 5‚272 1‚728 103‚719 12/31/16 7‚000 5‚186 1‚814 101‚905 12/31/17
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MAF302 Corporate Finance Study Guide Important Instruction This study guide provides you of an overview for each of the topic taught in this unit. These overviews however are not sufficient to learn all the materials in each of the topic. I therefore would suggest you to follow the materials in lecture notes and workshops. It is also essential to read and consult the corresponding text book chapters to develop your concept and knowledge in this unit. You will also find some references
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different than trading volume? On a trading day‚ can trading volume exceed open interest? b. Why does the open interest usually decline during the month preceding the delivery month? Question 2 Use the Black-Scholes model to value a call option on the following stock: Time to expiration 6 months Standard deviation 50% per year Exercise price $50 Stock price $50 Interest rate 3% You can solve this question either by formula or by Excel. If by Excel‚ attach Excel file with your
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a down-and-out barrier option on the firm’s assets. Asset values and volatilities as well as firm-specific bankruptcy barriers are simultaneously backed out from the prices of traded equity. Implied barriers are significantly positive and monotonic in the firm’s leverage and asset volatility. Our default probabilities display better calibration and discriminatory power than the ones inferred in a standard Black and Scholes [Black‚ F.‚ Scholes‚ M.‚ 1973. The pricing of options and corporate liabilities
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shortselling representativehelp of put market risk with the shares of the market the market index options on index Ready to Bear: individual security related risk; leverage 1. The fund deals with technology driven companies due to the expertise of its fund manager in that area; comfortable in prediction of individual stock related risk/ return 2. Use leverage to maximize returns 2 HEDGE FUND STRATEGIES Option Based Short-Selling Leverage • Extreme volatility in the • Used to eliminate market
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CHAPTER 17 Investments ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics 1. Questions Brief Exercises Exercises Problems Debt securities. 1‚ 2‚ 3‚ 13 1 (a) Held-to-maturity. 4‚ 5‚ 7‚ 8‚ 10‚ 13‚ 21 1‚ 3 (b) Trading. 4‚ 6‚ 7‚ 8‚ 10‚ 21 4 (c) Available-for-sale. 4‚ 7‚ 8‚ 9‚ 10‚ 11‚ 21 2‚ 10 4 1‚ 2‚ 3‚ 4‚ 7 1‚ 2‚ 3 3‚ 4‚ 5 Concepts for Analysis 1‚ 2‚ 3 1‚ 2‚ 3‚ 5 4‚ 7 1‚ 7 4 1‚ 4 1‚ 4 2. Bond amortization
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at an estimated residual value of $10‚000. If DTC buys the truck‚ its after tax cash flows would be the following: (Year 1) - 6‚339; (Year 2) -4‚764; (Year 3)-9‚943; (Year 4) -5‚640; all occurring at the end of respective years. The lease terms‚ call for a $10‚000 lease payment (4 payments total) at the beginning of each
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Debt funds invest in fixed income instruments‚ such as bonds‚ commercial papers‚ certificates of deposit and treasury bills. These instruments are safer than equities‚ but are not completely free from risks. The main factors that impact the value of debt instruments are interest rates‚ exchange rates‚ inflation and policies of the central bank. Apart from these‚ a weakening of credit rating of the issuer is also a source of risk for non-government debt papers. Let us look at some of the strategies
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Body…………………………………………………………………… .2-9 3.1 Transaction exposure………………………………………………………2-3 3.2 Three Hedges………………………………………………………………3-9 3.3.1 Forwards……………………………………………………………4-6 3.3.2 Futures……………………………………………………………..6-8 3.3.3 Currency option……………………………………………………8-9 3. Conclusion…………………………………………………………………………………...………….11-13 Introduction In the period of crisis the volatility of foreign exchange is the key element to be consider in the risk management strategy in multinational corporations
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Mark-to-market adjustments for fuel hedges recorded in periods other than the settlement period • As a signal of management competence 6/12 Fuel Hedging Instruments • Jet fuel‚ gas oil and crude derivatives: • • • • Forward contracts Future contracts Options and collars Swaps • Other hedging methods: • Merges and acquisitions International Air Transport Association (IATA) Clearing House: is used for
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