Financial Management TA Mid-term Exam March 27‚ 2012‚ 9:3o - 11:00 1. True or False Comment on the correctness of the following statements with maximum 5 lines each. (20%) a) The IRR is larger than the discount rate if the NPV>0 False‚ there are projects with more than one IRR where the statement is not true and there are projects that have the inflow now and the outflows in future years where this relation is inversed. b) Yield to maturity is not a valid measure of expected return for a zero
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Fin 4910/6990 Further Questions Problem 7.19 (a) Company A has been offered the rates shown in Table 7.3. It can borrow for three years at 6.45%. What floating rate can it swap this fixed rate into? (b) Company B has been offered the rates shown in Table 7.3. It can borrow for 5 years at LIBOR plus 75 basis points. What fixed rate can it swap this floating rate into? (a) Company A can pay LIBOR and receive 6.21% for three years. It can therefore exchange a loan at 6.45% into a loan at LIBOR plus
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Historical Degression Setting the Stage No-Arbitrage Bounds Relations between Puts and Calls Itô Refresher Appendix* Introduction Markus Leippold University of Zurich Chris Bardgett University of Zurich Elise Gourier University of Zurich Financial Engineering – September‚ 2012 Introduction 1 / 97 Historical Degression Setting the Stage No-Arbitrage Bounds Relations between Puts and Calls Itô Refresher Appendix* Outline 1 Historical Degression
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5) points. a) The Chart on Exhibit 20-2 displays five FDA approvals and five FDA disapprovals. b) The total value of dollars of the NPV disapproval is -$100M $500M‚ 50% 3. (a) This type of call option are created whenever you face a decision that is costly to reverse. When exercising an option to invest‚ the ability to purchase a particular stock is irreversible. You can delay in purchasing the stock‚ but you are
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percent coupon bond is currently quoted at 89.3 and has a face value of $1‚000. What is the amount of each semi-annual coupon payment if you own three (3) of these bonds? $100.46 $200.93 $112.50 $75.00 $56.25 Question 4: 1 pts A European put option grants the holder the right to: buy the underlying asset at the exercise price on the expiration date. buy the underlying security at a stated price at any time up to and including the expiration date. sell the underlying security at the strike
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etc.). Explain why. 5. Forward or Options? If Tiffany were to hedge the yen-dollar exchange rate risk‚ it can choose either forward contracts or options. Explain how Tiffany can hedge using forward contracts? How to hedge using options? The available forward contracts and options are described in Exhibit 8‚ assuming Tiffany can only use those derivatives to hedge. Based on what you have learned in this course‚ what are the pros and cons of using options to hedge compared to using forward contracts
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to it later. If you do not click finish your score will not be displayed on your e-workbook home page. However‚ your results will be provided to your instructor. [2 marks]- 1 of 3 ID: FRM.O.CP.01A Select all of the features of purchasing a put option on the Australian Stock Exchange (ASX) from the list below: | This derivative security costs nothing to enter.（F） | | This derivative security is a tailored OTC contract.（F） | | This derivative security is a standardized exchange traded
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choose between either to purchase a forward contract and lock the cost of the January US$7million or to purchase call options for the USD for $7.5million‚ and which course of action will provide the highest benefit and lowest risk possible under different exchange rates. Should the CAD depreciate with respect to the USD Pixonix costs would be higher. Question #2 Various Hedging Options: a) Purchase a forward contract Cain can eliminate exchange rate risk by engaging in a forward contract by locking
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hil61217_ch20_case.qxd 5/12/04 17:17 Page 46 ADDITIONAL CASES ■ CASE 20.3 PLANNING PLANERS This was the first time that Carl Schilling had been summoned to meet with the bigwigs in the fancy executive offices upstairs. And he hopes it will be the last time. Carl doesn’t like the pressure. He has had enough pressure just dealing with all the problems he has been encountering as the foreman of the planer department on the factory floor. What a nightmare this last month has been! Fortunately
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provide the relevant calculations. Assignment is individual. Assignments should be lodged at the next lecture (if you intend not to attend the lecture but would like to submit assignment‚ contact topic coordinator). Emailing assignment is not an option as one needs to get a permission in advance to do so. If you have been granted the permission then the assignment needs to be submitted before the start of the lecture‚ i.e. before 1pm. In case the assignment is submitted after 1pm‚ it will not be
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