Exhibit 21 $$\begin{array}{l}\begin{array} { c c } &\text { T-Bill } & \text { Eurodollar } \\\hline \text { September }& 95.24 & 94.6\end{array}\end{array}$$

question 86

Multiple Choice

Exhibit 21.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that you observe the following prices in the T-Bill and Eurodollar futures markets $$\begin{array}{l}\begin{array} { c c } &\text { T-Bill } & \text { Eurodollar } \\\hline \text { September }& 95.24 & 94.6\end{array}\end{array}$$
-Refer to Exhibit 21.7. Assume that a month later the price of the September T-Bill future is 96.25 and the price of the Eurodollar future is 95.9. Calculate the profit on the Eurodollar futures position.

• A)101 basis points.
• B)130 basis points.
• C)-101 basis points.
• D)-130 basis points.
• E)29 basis points.

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Definitions:

Target Capital Structure

The mix of debt, equity, and other financing sources a company aims to use to finance its operations and growth.

WACC

Weighted Average Cost of Capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets.

Cost of Equity

Cost of equity is the return a company requires to decide if an investment meets capital return requirements and can be seen as the return on equity that shareholders expect for their investment risk.

Flotation Cost

The total costs incurred by a company in issuing new securities, including underwriting, legal, registration, and other expenses.