After conducting a rate-sensitive analysis, a bank finds itself with the following amounts of rate-sensitive assets and liabilities (RSAs and RSL) and fixed-rate assets and liabilities (FRAs and FRLs); the rate of return and cost rates on the accounts are also given:

If we were to design a macrohedge, which of the following positions would help reduce the bank's interest rate risk?

I. Buying put options on bonds

II. Long position in bond futures contracts

III. Purchasing an interest rate cap

Roger Harkel, CEO of Bestafer, Inc. seeks to raise $6.6 million in a private placement of equity in his early stage venture. Harkel conservatively projects net income of $5 million in year five and knows that comparable companies trade at a price earnings ratio of 20X. If the company has 1,000,000 shares outstanding before the private placement, what price per share should she agree to pay if her required rate of return is 50%? (Note: Assume investment is in standard preferred stock with no dividends and a conversion rate to common of 1:1.Round off to the nearest integer.)

A finance company owns $50 million of floating-rate bonds yielding LIBOR plus 1 percent. These loans are financed with $50 million of fixed-rate guaranteed investment contracts (GICs) costing 10 percent. An insurance company has $50 million of auto loans with a fixed rate of 14 percent. The loans are financed with $50 million in CDs at a variable rate of LIBOR plus 4 percent.

Which of the following is correct?

I. The finance company (FC) is exposed to falling interest rates on the asset side of the balance sheet.

II. The FC wishes to convert the variable rate liabilities into fixed rate liabilities by swapping the variable rate payments for fixed rate payments.

III. The FC will make fixed rate payments and therefore is the buyer in the swap.