Considering some strategies for hedging interest-rate risk

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1. Assume you are the manager of a financial institution. You are considering some strategies for hedging interest-rate risk. Would you prefer using futures or option contracts? Why?

2. Consider the following information: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom .55 .15 .22 .42 Bust .45 .14 .04 ?.05 a. What is the expected return on an equally weighted portfolio of these three stocks? b. What is the variance of a portfolio invested 24 percent each in A and B and 52 percent in C?

Reference no: EM132041371

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