Exhibit 21 -Refer to Exhibit 21

question 25

Multiple Choice

Exhibit 21.2
Use the Information Below for the Following Problem(S)
Assume you are the Treasurer for the Johnson Pharmaceutical Company and in late July 2004, the company is considering the sale of $500 million in 20-year debentures that will most likely be rated the same as the firm's other debt issues. The firm would like to proceed at the current rate of 8.5%, but you know that it will probably take until November to bring the issue to market. Therefore, you suggest that the firm hedge the pending issue using Treasury bond futures contracts which each represent $100,000.
$$\begin{array} { l c c } & \text { Casel } & \text { Case2 } \\ \text { Current Value - July 2004 } & 8.5 \% & 8.5 \% \\\text { Bond Rate } & 87.75 & 87.75 \\\text { Dec. 2004 Treasury Bonds } & & \\\text { Estimated Values - Nov. 2004 } & 9.5 \% & 7.5 \% \\\text { Bond Rate } & 85.60 & 91.65 \\\text { Dec. 2004 Trea5ury Bonds } &\end{array}$$
-Refer to Exhibit 21.2.How you would go about hedging the bond issue?

• A) Buy 5,000 contracts
• B) Buy 50,000 contracts
• C) Sell 5,000,000 contracts
• D) Sell 5,000 contracts
• E) None of the above

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Definitions:

Skeletal Muscle

A type of striated muscle tissue which is attached to bones and is responsible for initiating and controlling voluntary movements.

Contraction

Contraction is the process of muscle fibers tightening or shortening, typically resulting in movement or the application of force.

Urinary Bladder

A muscular chamber that holds urine prior to its expulsion from the body.

Vasoconstriction

The narrowing of blood vessels, which increases blood pressure and decreases blood flow to certain areas.