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Exhibit 13-2
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
A futures contract on Treasury bond futures with a December expiration date currently trade at 103:06. The face value of a Treasury bond futures contract is $100,000. Your broker requires an initial margin of 10%.
-Refer to Exhibit 13-2. If the futures contract is quoted at 105:08 at expiration, calculate the percentage return.
Cost of Capital
The minimum earnings rate a corporation must achieve on its projects to sustain its market valuation and draw in investments.
After-Tax Cost of Debt
The net cost of debt to a company after accounting for the tax deductions obtained on interest payments.
Bond Rating
A rating assigned to a bond that indicates its credit quality. The rating reflects the issuer's ability to repay the bond's principal and interest.
After-Tax Cost of Debt
The net cost of debt to a company after accounting for the tax deductions on interest payments, effectively lowering the interest expense.
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