Question: can you help me with this question that's all the information that is given in the question ... there is no more further information A

can you help me with this question can you help me with this question that's all the information that
that's all the information that is given in the question ... there is no more further information

A company wishes to use financial futures to hedge its interest rate exposure. The company will sell 10 Treasury futures contracts at $139k per contract. It is Jul and the contracts must be closed out in Dec of this year. Long-term interest rates are currently 13.21%. If they increase to 14.78%, assume the value of the contracts will go down by 5%. Also if interest rates do increase by 1.86%, assume the firm will have additional interest expense on its business loans and other commitments of $54k. This expense will be separate from the futures contracts. Note: The term "k" is used to represent thousands (* $1,000). Required: In percentage terms, what is the net gain (or cost) to the firm once the increased interest expense is accounted for? % Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places (for example: 28.31%)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!