Describe the act of cross-hedging. What determines the effectiveness of a cross-hedge (A+ Guaranteed)

Cross-Hedging – Describe the act of cross-hedging. What determines the effectiveness of a cross-hedge?

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Explain how the probability distribution of a financial institution’s returns (A+ Guaranteed)

Impact of Futures Hedge – Explain how the probability distribution of a financial institution’s returns is affected when it uses interest rate futures to hedge. What does this imply about its risk?

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Explain the difference between a long hedge and a short hedge (A+ Guaranteed)

Long versus Short Hedge – Explain the difference between a long hedge and a short hedge used by financial institutions. When is a long hedge more appropriate than a short hedge?

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Why do some financial institutions remain exposed to interest rate risk (A+ Guaranteed)

Hedging Decision -Why do some financial institutions remain exposed to interest rate risk, even when they believe that the use of interest rate futures could reduce their exposure?

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Assume a financial institution has more rate-sensitive assets than rate (A+ Guaranteed)

Hedging with Futures Assume a financial institution has more rate-sensitive assets than rate-sensitive liabilities. Would it be more likely to be adversely affected by an increase or a decrease in interest rates? Should it purchase or sell interest rate futures contracts in order to hedge its exposure?

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Will speculators buy or sell Treasury bond futures contracts (A+ Guaranteed)

Treasury Bond Futures – Will speculators buy or sell Treasury bond futures contracts if they expect interest rates to increase? Explain.

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Explain why some futures contracts may be more suitable than others (A+ Guaranteed)

Hedging with Futures – Explain why some futures contracts may be more suitable than others for hedging exposure to interest rate risk.

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How does the price of a financial futures contract change (A+ Guaranteed)

Futures Pricing – How does the price of a financial futures contract change as the market price of the security it represents changes? Why?

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Describe the general characteristics of a futures contract (A+ Guaranteed)

Futures Contracts – Describe the general characteristics of a futures contract. How does a clearinghouse facilitate the trading of financial futures contracts?

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Your accounts receivable clerk, Mary Herman, to whom you pay (A+ Guaranteed)

Your accounts receivable clerk, Mary Herman, to whom you pay a salary of $3,495 per month, has just purchased a new Audi. You decided to test the accuracy of the accounts receivable balance of $272,610 as shown in the ledger.

The following information is available for your first year in business.

(1) Collections from customers $461,340
(2) Merchandise purchased 745,600
(3) Ending merchandise inventory 163,100
(4) Goods are marked to sell at 40% above cost

Compute an estimate of the ending balance of accounts receivable from customers that should appear in the ledger and any apparent shortages. Assume that all sales are made on account.

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