The rates in one month’s time are revealed as follows:Term % Sterling rate1 month 5.05-5.302 months 5.05-5.353 months 5.20-5.254 months 5.25-5.35What is the deposit rate that would have been available for the treasurer in the unhedged situation? Compare this rate with the hedged rate at which the £1m is deposited and comment on the hedge.

The rates in one month’s time are revealed as follows:Term % Sterling rate1 month 5.05-5.302 months 5.05-5.353 months 5.20-5.254 months 5.25-5.35What is the deposit rate that would have been available for the treasurer in the unhedged situation? Compare this rate with the hedged rate at which the £1m is deposited and comment on the hedge.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The amount of simple interest on a deposit varies jointly with the principal and the time in days. If $17.85 is earned on a deposit of $3500 for 12 days, how much interest would be earned on a deposit of $3700 for 20 days? ... The deposit would earn S in interest. (Simplify your answer. Round to the nearest cent as needed.)
The Deposit value on 10/1/20 is 4X. Not 8X.
What is the Effective Annual Rate (EAR) on a deposit account with a stated Annual Percentage Rate (APR) of 10.6% and monthly compounding? Enter your answer as a percentage rounded to 2 decimal places
What is the effective rate of interest if a bank specified a nominal rate of 20% compounded annually?
24. Which of the following is the base unit of time over which an interest rate is calculated? Interest Period Discount Rate Compounding Period Compounding Rate 25. Simple interest of P1,235 is owed on a loan of P9,500 after four years and four months. What is the annual interest rate? 2% 2.5% 3.5% 3%
You purchase a certificate of deposit and expect an inflation rate of 1.25% over the next year. Your nominal rate of interest is 2.1%. What is your expected real rate of return? O 0.85%O 1.25% -2.1% O -0.85%
Amortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued $12,000,000 of 5-year, 11% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Ebert Company receiving cash of $11,558,459. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round amounts to the nearest dollar. If an amount box does not require an entry, leave it blank. 2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. 3. Second semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry. leave it blank.
How do interest expense and the carrying value of the note change over time for an installment note with fixed monthly loan payments?
You come across two banks offering different compounding interest rates. Public Bank offers 12 percent compounded semi-annually while Maybank offers 11.8 percent compounded monthly. Which bank should you deposit in? Show all relevant workings
8. Solve for maturity value, discount period, bank discount, and proceeds. Assume a bank discount rate of 9%. Use the ordinary interest method. (Use Days in a year table.) Note: Do not round intermediate calculations. Round your final answers to the nearest cent. Face value (principal) Rate of interest Length of note Maturity value date of note date note discounted discount period bank discount proceeds $25,000 9% 60 days June 8 July 10
Suppose that a bank does the following: a. Sets a loan rate on a prospective loan with BR = 4.23% and ϕ = 3.16%. b. Charges a 0.33 percent loan origination fee to the borrower. c. Imposes a 9 percent compensating balance requirement to be held as noninterest-bearing demand deposits. d. Holds reserve requirements of 8 percent imposed by the Federal Reserve on the bank’s demand deposits. Calculate the bank’s ROA on this loan.

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