18. Manufacturers who are concerned about volatile commodity

18. Manufacturers who are concerned about volatile commodity prices often use option contracts to alter their risks. What is the best-case scenario for a seller of put options on corn with an exercise price of $2.25 per bushel?,____ ,A) If corn prices drop below $2.25, the option premium will be lost,B) If corn prices rise above $2.25, the option premium will be kept,C) Losses can be unlimited if prices drop significantly,D) Gain can be unlimited if prices rise significantly,

P9-10 Cost of common stock equity Ross Textiles wishes to measure

P9-10 Cost of common stock equity Ross Textiles wishes to measure its cost of common stock equity. The firm’s stock is currently selling for $57.50. The firm expects to pay a $3.40 dividend at the end of the year (2013). The dividends for the past 5 years are shown in the following table.

1. Home equity loans to consumers are generally based on the

1. Home equity loans to consumers are generally based on the residual value of a home (i.e., market value less the remaining balance on the outstanding home mortgage loan) and the fraction of the value (known as the loan-to-value ratio) that the lending institution is willing to lend. The customer’s borrowing base is the product of these two entities. Calculate the customer’s borrowing base in the situations described below: ,,Appraised Value of ,Borrower’s Home Mortgage Loan ,Balance Outstanding Lender’s Required ,Loan-to-Value Ratio,,a. $173,500 $67,800 75%,b. $64,150 $23,948 70%,c. $251,400 $111,556 80%,d. $789,000 $340,722 82%,

1. One final triangular arbitrage question from a previous exam.

1. One final triangular arbitrage question from a previous exam. Suppose a trader obtains the following quotes in the following markets:,,- Dallas: $/SF= $0.9200-10,- Stockholm: $/kr=$0.1575-85,- Zurich: kr/SF= kr 5.65 – 75,. Does an arbitrage opportunity exist? Suppose you start with $10,000,000. Indicate exactly how much profit you would make. Show all of your work.,,

2. Which consumer-oriented law or laws apply in each of the

2. Which consumer-oriented law or laws apply in each of the situations described below:,a. Matthew Crey is discussing with a bank loan officer the terms on a loan he needs to buy a car for his family. ,b. Robert and Mary Nash believe they were discriminated against when their loan to purchase a new home was denied.,c. Sally Ferrel was denied a loan because of an adverse report from her credit bureau, which she believes is in error.,d. Herbert Coleman has just received his credit-card bill and finds several charges were made against his account that are not legitimate.,e. Mary Eacher leased an automobile from a dealer for three years, but the lease was abruptly canceled even though Mary was making all required payments on time.,f. First National Bank of Arden has just announced its latest CRA rating received from federal bank examiners.,g. Earl and Susan Tolber believe they were denied a home improvement loan because their address is in a h. neighborhood where the local bank does not like to make such loans.,h. Bill Gell decides to opt out of letting his bank and his insurance company share information about him with other businesses.,i. Jean Shal has just been notified by her bank that it is going to reduce the interest rate on her certificate of deposit when it is renewed.,j. John Saral is confused about the terms of a credit card and needs additional information from the card company.,k. Bob and Rachel Hamm are unable to meet their monthly debt-service payments and are about to lose their home.,

four factors that drive the current level of interest rates:

four factors that drive the current level of interest rates: inflation, maturity, default risk, and prepayment risk. Do you think interest rates on corporate bonds will go up or down over the next year? Which factor is most important in explaining your current interest rate outlook for corporate bonds? Explain.