Ask Question, Ask an Expert


Ask Basic Finance Expert

problem 1: The bank customer will be going to London in June to purchase Rs.100,000 in new inventory. The present spot and futures exchange rates are:

1970_exchange rates.jpg

The customer enters to a position in June futures to fully hedge her position. When June arrives, the actual exchange rate is $1.725 per pound. How much did she save?

problem 2: Consider the given cash flows. All market interest rates are 12%:

893_cash flows.jpg


a) What price would you pay for such cash flows? What total wealth do you expect after 2½ years if you sell the rights to the remaining cash flows? Suppose interest rates remain constant.

b) What is the duration of such cash flows?

c) Instantly after buying such cash flows, all market interest rates drop to 11%. Determine the impact on your total wealth after 2½ years?

problem 3: Ebay, Inc. went public in September of 1998. The given information on shares outstanding was listed in the final prospectus filed with the SEC1.

In IPO, the Ebay issued 3,500,000 new shares. The initial price to the public was $18.00 per share. The final first-day closing price was $44.88.

a) If the investment bankers retained $1.26 per share as fees, what were the total proceeds to Ebay? What was the market capitalization of new shares of the Ebay?

b) Two general statistics in IPOs are under pricing and money left on the table. Under pricing is defined as percentage change between the offering price and the first day closing price. Money left on the table is the difference between the first day closing price and the offering price, multiplied by the number of shares offered. Compute the under pricing and money left on the table for Ebay. What does this propose about the efficiency of the IPO process?

problem 4: If stock prices didn’t follow a random walk, there would be unexploited profit opportunities in the market. Is this statement true, false or uncertain? Describe your answer.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M95963

Have any Question? 

Related Questions in Basic Finance

Network communications has total assets of 1870000 and

Network Communications has total assets of $1,870,000 and current assets of $667,000. It turns over its fixed assets one times a year. It has $335,000 of debt. Its return on sales is 5 percent. What is its return on stoc ...

How do reits differ from other mutual fundsare all reits

How do REITs differ from other mutual funds? Are all REITs pretty much the same? What are their differences?

What situation would you use preferred and convertible

What situation would you use preferred and convertible instruments as investments in? Why?

In the face of global oil price shocks what could monetary

In the face of global oil price shocks, what could monetary policymakers do to minimize the resulting recessionary gaps? What would be the tradeoff of such a policy? Illustrate your answer using the aggregate demand-aggr ...

Johnson company has an equity beta of 15 the risk-free rate

Johnson company has an equity beta of 1.5, the risk-free rate of return is 3.0 percent, the market return is 14.7 percent, and the pretax cost of debt is 9.4 percent. The debt-equity ratio is .47. If you apply the common ...

1 assume that a public corporation has 10000000 shares

1. Assume that a public corporation has 10,000,000 shares outstanding. First, you are to create the necessary Balance Sheets and Income Statements and then calculate the annual Cash Flow from Assets (aka: CFFA or Free Ca ...

1 a 3 year-bond is paying a coupon rate of 10 per year

1. A 3 year-bond is paying a coupon rate of 10% per year semi-annually. The par value of the bond is R1000 and the annual market interest rate is 8%. a) Calculate the price of the bond today and 6 months from now after p ...

No plagiarism pleasethe sarbanes-oxley act of 2002 sox was

No Plagiarism please The Sarbanes-Oxley Act of 2002 (SOX) was passed as the result of the Enron scandal and other instances of accounting fraud. This act was passed to strengthen the role of the Securities and Exchange C ...

1 why is it advantageous to conduct your business with a

1. Why is it advantageous to conduct your business with a bank that provides online banking services? 2. Why is it best to select a bank with convenient ATMs?

The probability of an engines failing during a 30-day

The probability of an engine's failing during a 30-day acceptance test is 0.3 under adverse environmental conditions. Eight engines are included in such a test. What is the probability of (i) none will fail and (ii) more ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate