Reference no: EM132783498
1. Portfolio = $1,000,000, 90% in equity earning 12%, 40% in Fixed Income = $125,000 earning 2.5% [ note 90% + 40% > 100%, there is a margin here, assume the cost of margin is 6.5%]. Calculate the FV in 5 years.
2. A bond YTM is 5%, coupon is 9%, term is 10 years semiannual. Calculate the effective duration. Assume the yield rises by 60 bps, provide the duration-based change in bond price and actual calculator-based price. Calculate and explain the error.
3. An investor has an equity of $250,000 in SPY (S & P 500 ETF). He doubles the investment using the broker's margin assuming a 0.5 initial margin. If the maintenance margin is 0.35, determine:
a. The SPY current price
b. Price at which there will be a margin call (MC)
c. % decline in which there will be a MC
d. Required action if there is a MC
e. If SPY had increased by 14% in one year, calculate the ROI.
4. If you were bearish, and shorted $100,000 of SPY:
a. Provide the margin requirement
b. If the stock declines 5%, provide the ROI.
c. Explain when to use the bid and ask quotes.
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: Portfolio = $1,000,000, 90% in equity earning 12%, 40% in Fixed Income = $125,000 earning 2.5% [ note 90% + 40% > 100%, there is a margin here
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