Exhibit 21 -Refer to Exhibit 21

question 28

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.What is the dollar gain or loss assuming that future conditions described in Case 1 actually occur? (Ignore commissions and margin costs,and assume a naive hedge ratio.)

• A) $47,316,683.00 gain
• B) $36,566,683.00 loss
• C) $10,750,000.00 gain
• D) $10,750,000.00 loss
• E) None of the above

---

Definitions:

Tarantism

A historical form of hysteria or dancing mania reported in southern Italy, supposedly caused by a tarantula bite.

Fourteenth Century

The period from 1301 to 1400 in the Gregorian calendar, notable for significant events in world history, including the Black Death and developments in art and literature.

Tarantula Bite

The act of a tarantula using its fangs to puncture the skin, usually non-lethal to humans but can cause pain and allergic reactions.

Psychic Epidemics

Mass psychological phenomena in which a large number of people exhibit similar mental symptoms or behaviors, often as a result of shared stressors or fears.