Suppose Alcoa in 1995 Had a Payable of FF 1

question 35

Multiple Choice

Suppose Alcoa in 1995 had a payable of FF 1 million due in one year.Alcoa's cost of the payable using a money market hedge is ____ and its cost using a forward market hedge is ____.

• A)$173,900;$177,470
• B)$174,925;$176,300
• C)$176,671;$172,900
• D)$178,937;$174,700

---

Definitions:

Bond's Price

The current market value of a bond, which can fluctuate based on interest rate movements and the bond's credit quality.

Present Value

The immediate financial value of a future cash sum or succession of cash inflows, evaluated with a specified return rate.

Expected Cash Flows

Forecasted cash inflows and outflows for a business or project, often used in financial modeling to evaluate investment viability.

Yield to Maturity

The total return anticipated on a bond if it is held until the date it matures.