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A portfolio manager is concerned with the stock market heading towards a correction. The manager has a $100 million S&P 500 risk position and decides to hedge his portfolio with the S&P 500 index futures. Currently, the one month ahead S&P 500 index future is priced at 5000, and one S&P index futures contract is valued at $250 multiplied by the index value.
-What position (number and forms of contract) should the fund manager take in order to hedge 60% of his risk position?
-After a month, the S&P 500 drops by 8%; what's the dollar gain/loss from the fund manager's risk and hedging position? What is the net gain/loss for the manager?
-What position should the fund manager take if the beta of the fund manager's risk position is 1.5?
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The following statements are not associated with Futures, except:
As your prize, you will receive $2,000 a month for ten years. If you can earn 7 percent on your money, what is this prize worth to you today?
With examples, briefly discuss five reasons why the study of management decision models is important.
What is an example of any common product or service other than tobacco, alcohol, gambling or pornography that would be hard for an honest person to market?
Your company offers debtors 60 days interest free to settle their accounts. After, interest is charged monthly on balances owing at a rate of 9% p.a. Little Co. made a purchase of $20,000 from your company. What is the settlement amount after 8 mo..
Compute the effect of this estimated change in inflation on the price on the price of a 15-year, 10 percent coupon bond with a current yield to maturity of 8 percent. Please show how you arrived at the answer.
Briefly explain the process of vibratory compaction as used in soil improvement.
A large retailer obtains merchandise under the credit terms of 1/20, net 30, but routinely takes 70 days to pay its bills.
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