The manager of a newly organized corporation wants to hedge


Question: The manager of a newly organized corporation wants to hedge the company's market related risk for the next three years. The manager estimates the market value of the company is $150 million. The manager estimates the beta of the company is 2.40. The 1-, 2- and 3- year forward prices for the S&P 500 index are: 2369.20, 2374.10, 2393.20, and 2422.35. The risk free rate on a 3-year investment is 2%. What will the terms of the swap be?

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Finance Basics: The manager of a newly organized corporation wants to hedge
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