The company expects to invest approximately $1 million in three months in corporate bonds. The current rate of interest is 5.10%. To hedge the position, the company wishes to use 3 year Treasury bond futures contracts trading at 9800. Calculate the profit or loss from the position in futures market if in 3 months the contracts are trading at 91.900.
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- The S&P 500 spot price is $4,570. The futures price with 6-months delivery is $4,895. The risk-less rate of return for 6-months is 3.68%. You enter into ONE futures contract to deliver ONE index portfolio in 6-months and receive $4,895. Whatever profit you make, you transfer to today. How much $ profit will you have today? Hint: Borrowing money today and selling risk-less bonds are equivalent actions. Whatever $ profit you may make from the above transactions, you have to bring back to today by borrowing at the risk-less rate. Assume no transactions costs (you can borrow and lend at the risk-less rate etc.).It is now March and the current cost of debt for Basis A is 12%. Basis A plans to issue $ 5mn in 20-year bonds (with semi-annual coupons) in September, but fears that rates will rise even higher before then. The following data is available: Futures Prices: Treasury Bonds - $ 100,000; Pts. 32nds of 100% a. What is the implied interest rate for the September contract? b. build a hedge for Basis A.Stohs Semiconductor Corporation plans to issue$50 million of 20-year bonds in 6 months. Theinterest rate would be 9% if the bonds were issuedtoday. How can Stohs set up a hedge against anincrease in interest rates over the next 6 months?Assume that 6-month futures sell for 100’220.
- Assume today is the 2nd January 2020. Central Bank of Oman issued a zero coupon bond which will mature on 1st January 2023. The bond promises to pay 4000 Rials on maturity. Assuming required rate of return is 8%, what is the present value of the bond ? (assume yearly compounding) Select one: a. 4000 O b. 0 O c. 2940 O d. None of these O e. 31756. Today is March 31, and corporation RPK plans to issue $450 million in 30-year bonds on May 15th. These bonds are priced at par and have a modified duration of 15. RPK wants to hedge their interest rate risk using June T-bond futures contracts which have a price of 95 3/32 and a modified duration of 10. Show the following: How would RPK hedge in this situation using T-bond futures contracts? (Be specific) Show the net loss/gain if on May 15 the bond price is 96.22 and the June T-bond futures price is 92 6/32, Round to 4 decimalsQ1. A firm has just issued (January 1, 2019) a bond that has a face value of $1,000, a coupon rate of 6 percent paid semi-annually (June 30, December 31), and matures in 8 years. The bonds were issued with a yield to maturity of 7%. What price were the bonds issued at? Assume that on July 1, 2021, the bond trades to earn an effective yield of 10%. At what price should this bond be trading for on July 1, 2021? PRICE WHEN ISSUED: PRICE ON JULY 1, 2021:
- Q1-8. A market maker wants to delta hedge a long position of $10 million in face value of 20-year bonds with 30-year bonds until he/she finds a buyer of the 20-year bonds. DV01 of the 20-year BF2201 Investments 4 bond is 0.1184 and DV01 of the 30-year bond is 0.1429. If the 20-year yield is expected to rise 1.1bp for each 1bp increase in the 30-year bond, what should be the position of the 30-year bond for this market maker? A. Short position of $13.28 million B. Long position of 13.28 million C. Short position of 10.97 million D. Short position of 9.11 million E. Short position of 7.53 millionA bond, described in the exhibit below, is sold for a settlement on 8 April 2021.Annual Coupon rate:12%Coupon payment frequency: monthlyMaturity date*: Your ID number(4521) + Settlement dateDay count convention : 30 / 360Annual yield to maturity:9%Face value:1,000 USDCalculate the dirty price (full price), clean price (flat price) and accrued interest (AI). (* Example if your ID number 9876, then 8 April 2021 + 9876 days = 22 April 2048)You find the following Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2022. All of the bonds have a par value of $1,000 and pay semiannual coupons. Rate 77 5.674 6.208 Maturity Month/Year May 35 May 40 May 50 Bid Asked 103.5457 103.5579 104.5069 104.6526 22 27 a. Asked price b. Bid price Change +.3132 +.4401 +.5522 Ask Yield 6.179 ?? 4.211 a. In the above table, find the Treasury bond that matures in May 2050. What is the asked price of this bond in dollars? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. If the bid-ask spread for this bond is 0588, what is the bid price in dollars? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
- A bond, described in the exhibit below, is sold for a settlement on 8 April 2021.Annual Coupon rate:12%Coupon payment frequency: monthlyMaturity date*: 11396 + Settlement dateDay count convention : 30 / 360Annual yield to maturity:9%Face value:1,000 USDCalculate the dirty price (full price), clean price (flat price) and accrued interest (AI). * Example if your ID number 9876, then 8 April 2021 + 9876 days = 22 April 2048You find the following Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2022. All of the bonds have a par value of $1,000 and pay semiannual coupons. Rate ?? 5.724 6.213 Maturity Month/Year May 32 May 35 May 41 Bid Asked 103.4742 103.5470 104.5082 104.6539 ?? ?? Change +.3145 +.4413 +.5535 Ask Yield 6.199 ?? 4.231 In the above table, find the Treasury bond that matures in May 2035. What is your yield to maturity if you buy this bond? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Yield to maturity %A corporation plans to issue $10 million of 10-year bonds in three months. At current yields the bonds would have modified duration of 8 years. The T-note futures contract is selling at F0 =100 and has modified duration of 6 years. How can the firm use this futures contract to hedge the risk surrounding the yield at which it will be able to sell its bonds? Both the bond and the contract are at par value.