An oil company has zero coupon notes outstanding that mature one year from now. that is, each note promises to make a single payment of $1000 one year from now with no coupon payments between now and then. unlike ordinary zeros, the note also promises investors a bonus payment equal to 15 times the amount by which the prevailing oil price on the maturity date exceeds $60 per barrel (for example, if the oil price is $62 at maturity, the holder receives $1000 plus 15 x $2 or $1030 in all; if the price of oil is below $60, the holder receives only $1000). the oil company’s investment bankers estimate that the oil company could instead have issued a conventional one‐ year zero at a yield of about 8%. suppose also that investors are convinced that the price of oil one year from now will be either $50 or $70 per barrel. annual risk free rate is 3% and the current oil price per barrel is $60.

suppose that investors do not have good idea about what oil price will be in the next year. but, they believe that the annual standard deviation of oil prices is 20%. how much do you think the notes are worth?

Which of the following is the least risky? collectables stock savings bond savings account

Suppose that xtel currently is selling at $40 per share. you buy 500 shares using $15,000 of your own money, borrowing the remainder of the purchase price from your broker. the rate on the margin loan is 8%. a. what is the percentage increase in the net worth of your brokerage account if the price of xtel immediately changes to (a) $44; (b) $40; (c) $36? (leave no cells blank - be certain to enter "0" wherever required. negative values should be indicated by a minus sign. round your answers to 2 decimal places.) b. if the maintenance margin is 25%, how low can xtel’s price fall before you get a margin call? (round your answer to 2 decimal places.) c. how would your answer to requirement 2 would change if you had financed the initial purchase with only $10,000 of your own money? (round your answer to 2 decimal places.) d. what is the rate of return on your margined position (assuming again that you invest $15,000 of your own money) if xtel is selling after one year at (a) $44; (b) $40; (c) $36? (negative values should be indicated by a minus sign. round your answers to 2 decimal places.) e. continue to assume that a year has passed. how low can xtel’s price fall before you get a margin call? (round your answer to 2 decimal places.)

Bakery has bought 250 pounds of muffin dough. they want to make waffles or muffins in half-dozen packs out of it. half a dozen of muffins requires 1 lb of dough and a pack of waffles uses 3/4 lb of dough. it take bakers 6 minutes to make a half-dozen of waffles and 3 minutes to make a half-dozen of muffins. their profit will be $1.50 on each pack of waffles and $2.00 on each pack of muffins. how many of each should they make to maximize profit, if they have just 20 hours to do everything?