In the basic EOQ model, if lead time increases from 5 to 10 days, the EOQ will:
Kushie's Coffee in Bangalore is a quaint establishment nestled near MG Road in the central business district. It serves coffee and fruit cake to a clientele that has been enjoying these products for over fifty years. The demand for coffee beans is 6600 cases per year (each case has 24 ten-pound bags). It would be disastrous for them to run out of coffee, so they keep a safety stock of 30 cases. The cases cost $4800 and it costs $5 per case to order coffee. As coffee is a perishable product, the holding cost is fairly high at $40/case/year. The lead time to receive an order is seven days. Kushie's is open 300 days a year.
A) double.
B) increase, but not by double the amount.
C) remain the same.
D) decrease.
Answer: C
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If a tranche spread is 55 basis points and the fixed coupon is 60 basis points, which of the following happens when a trader buys protection?
A. The trader pays an estimate of the present value of 5 basis points per year and then pays 55 basis points per year B. The trader pays an estimate of the present value of 5 basis points per year and then pays 60 basis points per year C. The trader receives an estimate of the present value of 5 basis points per year and then pays 55 basis points per year D. The trader receives an estimate of the present value of 5 basis points per year and then pays 60 basis points per year