User Account

All Pages

Calculate the expected percentage decrease

Assignment Help Business Management
Reference no: EM133055859

A US investor has a $50 Million dollar Stock Portfolio. The investor is worried about a declining market. The following information is provided:

-Beta of the stock portfolio is 1.25

-S&P 500 Index at the beginning of the year is 1,500. Investor is worried the S&P 500 index may decline to 1,200 by the end of the year.

-Value of 1 S&P 500 contract is $250.

1. Describe how the US investor can hedge against a decline in their stock portfolio if the market decreases as expected. No calculations are required.

2. Calculate the expected percentage decrease in the market anticipated by the US investor.

3. Calculate the dollar amount at risk (loss in portfolio value) if the market decreases as expected.

4. Calculate the hedge ratio.

5. If the market declines exactly by the amount expected and the investor executed the hedge at the beginning of the year, what is the dollar amount of the loss in the portfolio? Explain?

Reference no: EM133055859

Questions Cloud

Award process for selecting vendors : In most cases, the healthcare facility's purchasing department is the entity responsible for procuring goods and services and for overseeing the procurement pro
What is the yield to maturity on a 14-year bond : Vitality Vancouver Inc. (VVI) has recently raised debt capital through long-term financing. The bond indenture includes issuing 8% coupon bonds on the market th
Describe considerations or precautions : Describe considerations or precautions for users when working with OS command line tools versus GUIs.
Prepare journal entry to record formation of partnership : PETER contributed $40,000 cash and accounts receivable worth $12,000. Prepare the journal entry to record the formation of the partnership
Calculate the expected percentage decrease : A US investor has a $50 Million dollar Stock Portfolio. The investor is worried about a declining market. The following information is provided:
Incorporated into security awareness policy : What do you think are the two most important practices that should be incorporated into a security awareness policy?
Compute the simple rate of return on the equipment : Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipment's useful life
Business manager in electronic commerce initiatives : Describe the role of a business manager in electronic commerce initiatives.
How many units must the company produce : If sales are expected to be 160000 units for the year and Coronado desires ending finished goods of 34000 units, how many units must the company produce

Reviews

Write a Review

Business Management Questions & Answers

  How environmental issues in turkey may affect attractiveness

How environmental issues in turkey may affect the attractiveness of the country's business environment to foreign firms and the potential risk of doing business there.

  Discuss the ever-growing list of companies

Also discuss the ever-growing list of companies who have had data breachesand what that means to you, your family, your employer, and what measures can you take

  Building an integrated project management system

building an integrated project management system

  Program to executives and employees

How and what would you communicate on the total rewards program to executives and employees?

  Producers of a special pool-cleaning robot

Suppose that Firm A and Firm B are two of the largest producers of a special pool-cleaning robot. Suppose that the marginal cost of making such a robot is constant at $1,500 per unit and there is no start-up cost. The demand for the robot is descr..

  Describe supply chain management

Describe supply chain management and its relationship to manufacturing and logistics. Why must reverse logistics be considered?

  Which type of project planning methodology you recommend

Outline which type of data communications you recommend are needed for your project. Describe which type of project planning methodology you would recommend for your project.

  Discuss the extent to which knowledge building

Discuss the extent to which knowledge building through research, development and innovation can generate benefits to both firms and the economy.

  Difference between interviews and written questionnaires

What is the difference between interviews and written questionnaires?

  Advantage of new survey platforms

What changes does Sonic need to make in its survey designs to take advantage of these new survey platforms?

  Supply chains

Walmart's business model revolves around creating a competitive advantage by leveraging suppliers against one another to reduce prices.

  Discuss the importance of value chain analysis

Discuss the importance of Value Chain Analysis in a dairy (milk) industry

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd