Question

Answer the following questions:


Name and address                   Number of shares       Percentage of shares       After offering
                                                 Beneficially owned       prior to offering

Jeffrey P Bezos
c/o Amazon.com,                                 9,885,000                  7.5%                            41.4%
Inc 1516 Second Avenue,
4th Floor Seattle,WA 98101

L.John Doerr Kleniner Perkins
Caufield and Byers 4 Embarcadero    3,401,376                  16.4                               14.3
Center, Suite 3520 San Francisco
Ca 94111

Tom A.Alberg                                     195,000                      *                                    *

Scott D.Cook                                       75,000                      *                                    *

Patricia Q Stonesifer                           75,000                      *                                    *

All directors and excutive
offers as a group (14 persons)            15,688,925               72.5                               63.5

total shares outstanding                      20,858.702               100.0


Page 566

In the IPO,the firm issued 3,000,000 new shares. The initial price was $ 18.00/share with investment bankers retaining $ 1.26 as fees. The final first day closing price was $ $23.50

1.) What were the total proceeds from the offering?
What part was retained by amazon?
What part by the investment bankers?
What percent of the offering is this?

2.)Mr.Doerr of Klenier Perkins Caufield and Byer owned a significant number of shares. What was the market value of these shares at the end of the first day of trading?

3.)What was the market value at Amazon.com following its first day as a publicity held company?

4.)Refer back to the IPO of eBay presented in the problem for chapter 13.What were the fees for eBay as a percent of funds raised? Does a pattern emerge?

Page 586

1.)A bank issues a $100,000 variable rate 30 year mortgage with a nominal annual rate of 4.5%.If the required rate drops to 4.0% after the first six months, what is the impact on the interest income for the first 12 months?

2.)A bank issues $ 100,000 fixed rate 30 year mortgage with a nominal annual rate of 4.5%.If the required rate drops to 4.0% immediately after the mortgage is issued, what is the impact on the value of the mortgage?

3.)Calculate the duration of a $ 100,000 fixed rate 30 year mortgage with a nominal annual rate of 7.0%.What is the expected percentage change in value if, the required rate drops to 6.5% immediately after the mortgage is issued?

4.)The value of a $ 100,000 fixed rate 30 year mortgage falls to $ 89,537,when interest rates move from 5% to 6%.What is the approximate duration of the mortgage?

5.)Calculate the duration of a commercial loan. The face value of the loan is $ 2,000,000.It requires simple interest yearly, with an APR of 8%.The loan is due in four years. The current market rate for such loans is 8%.

6.)A bank’s balance sheet contains interest-sensitive assets of $ 280 million and interest sensitive liabilities of $ 465 million.Calcualte the income gap.

7.)Calculate the income gap for a financial institution with rate sensitive assets of $ 20 million and rate sensitive liabilities of $ 48 million. If interest rates rise from 4% to 4.8%,what is the expected change in income?

8.)Calculate the income gap given the following items.

$8 million in reserves
$25 million in variable rate mortgages
$4 million in checkable deposits
$2 million in savings deposits
$6 million of two-year CD’s

Page 620

1.)If the pension fund you manage expects to have an inflow of $ 120 million six months from now, what forward contract would you seek to enter into a lock in current interest rates?

2.)If the portfolio you manage is holding $ 25 million of6s of 2029 Treasury bonds with a price of 110,what forward contract would you enter into a hedge the interest rate risk on these bonds over the coming year?

3.)If at expiration date the deliverable Treasury bond is selling for 101 but the treasury bond futures contract is selling for 102,what will happen to the futures price? Explain your answer.

4.)If you buy $ 100,000 February Treasury bonds contract for 108 and the price of the deliverable Treasury bond at the expiration date is 102,what is your profit or loss on the contract?

5.)Suppose that the pension you are managing is expected an inflow of funds of 4 100 million next year and you want to make sure that you will earn the current interest rate of 8%,when you invest the incoming funds in long term bonds. How would you use the futures market to do this?

6.)How would you use the options market to accomplish the same thing as in Problem 5?What are the advantages and disadvantages of using an options contract rather than a futures contract?

7.)If you buy a put option on a $ 100,000 Treasury bond futures contract with an exercise price of 95 and the price of the Treasury bond is 120 at expiration, is the contract in the money, out of the money, or at the money? What is your profit or loss on the contract if the premium was $ 4,000?

8.)Suppose that you buy a call option on a $ 100,000
Treasury bond futures contract with an exercise price of 110 for a premium of $ 1500.If on expiration
The futures contract has a price of 111,what is your profit or loss on the contract?

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