Description of this paper

a. Create a hedge with the futures contract for Z...

Description

Solution


Question

a. Create a hedge with the futures contract for Zinn Company?s planned June debt offering of $10 million. What is the implied yield on the bond underlying the future?s contract? b. Suppose interest rates fall by 300 basis points. What is the dollar savings from issuing the debt at the new interest rate? What is the dollar change in value of the futures position? What is the total dollar value change of the hedged position? c. Create a graph showing the effectiveness of the hedge if the change in interest rates, in basis points, is: -300, -200, -100, 0, 100, 200, or 300. Show the dollar cost (or savings) from issuing the debt at the new interest rates, the dollar change in value of the futures position, and the total dollar value change.

 

Paper#10291 | Written in 18-Jul-2015

Price : $25
SiteLock