USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 137

Multiple Choice

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 bonds 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.

-Refer to Exhibit 15.2. What is the dollar gain or loss assuming that future conditions described in Case 1 actually occur? (Ignore commissions and margin costs .)

• 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) $0

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Definitions:

Sex Reassignment Surgery

A medical procedure or series of procedures by which a person's physical sexual characteristics are altered to resemble those socially associated with their identified gender.

Estrogen Shots

are injections of the hormone estrogen used to treat various health conditions, such as hormonal imbalances or to aid in the physical transition process for transgender women.

Transsexuals

Individuals who identify with a gender different from the one assigned at birth and who may seek to undergo medical procedures to align their physical appearance with their gender identity.

Sexual Orientation

An inherent or immutable enduring emotional, romantic or sexual attraction to other people, which can be towards the same sex, opposite sex, or both.