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AleksAgata [21]
2 years ago
10

On May 15, 2000 you enter into a 1-year forward rate agreement (FRA) with a bank for the period starting November 15, 2000 to Ma

y 15, 2001. You will receive the forward rate and pay the floating rate in the FRA. You know that currently the price of the 6-month zero coupon is $96.79 and the price of the 1-year zero coupon is $93.51.
a. What is the agreed-upon forward rate in the transaction?

b. What is the value of the forward at inception?
Business
1 answer:
Artyom0805 [142]2 years ago
7 0

Answer:

a.

3.51%

b.

0%

Explanation:

a.

First, we need to calculate the YTM of 6 months zero-coupon bond by using the following formula

Price = Face value / ( 1 + YTM )^numbers of years

96.79 = 100 / ( 1 + YTM )^1

1 + YTM = 100 / 96.79

1 + YTM = 1.0331646

Now calculate the YTM of 1 Year zero-coupon bond

93.51 = 100 / ( 1 + YTM )^1

YTM = 1.0331646 - 1

YTM = 0.0331646

YTM = 3.31646%

YTM = 3.316%

1 + YTM = 100 / 93.51

1 + YTM = 1.06940

YTM = 1.06940 - 1

YTM = 0.06940

YTM = 6.940%

YTM = 6.94%

Hence the forward rate is calculated as follow

Forward rate = [ (1 + YTM of 1 year zero coupon bond ) / ( 1 + YTM of 6 months year zero coupon bond ) ] - 1 = ( 1 + 6.94% ) / ( 1 + 3.316% ) = [ 1.0694 / 1.03316 ] - 1 = 1.03508 - 1 = 0.03508 = 3.508% = 3.51%

b.

At the time of inception the formward rate is 0.

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Dmitriy789 [7]

Answer:

See below

Explanation:

Given selling price per unit = $300,000/5,000 units = $60

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The trial balance of Mendez Company at the end of its fiscal year, August 31, 2022, includes these accounts: Beginning Inventory
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Answer:

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COGS: 154,700

Net Sales: 186,000

Explanation:

Beginning Inventory                         18,700

Purchases                                       154,000

Freight-In                                            8,000

Purchase Returns and Allowances (5,000)

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COGS                                               154,700

Sales Revenue                            190,000

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Net Sales:                                    186,000

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2 years ago
The Bankruptcy Abuse Prevention and Consumer Protection Act allows the bankruptcy court to disallow a petition for a Chapter 7 b
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<h3><u>Explanation:</u></h3>

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