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For the following scenarios, describe a hedging strategy using OPTIONS contracts. Discuss the reasons for your choice of contract. Using only OPTIONs CONTRACTS.
a) A public utility is concerned about rising costs.
b) A corn farmer fears that this year’s harvest will be at record high levels across the country.
c) A natural gas producer believes there will be excess supply in the market this year.
d) A bank derives all its income from long-term, fixed-rate residential mortgages.
e) A stock mutual fund invests in large, blue-chip stocks and is concerned about a decline in the stock market.
f) A U.S. exporter of construction equipment has agreed to sell some cranes to a German construction firm. The U.S. firm will be paid in euros in three months.
Compare retirement savings plans (Learning Objective 3) Assume that you want to retire early at age 54. You plan to save using one of the following two strategies: (1) save $4,200 a year in an IRA beginning when you are 24 and ending when you are 54 ..
Written Assignment: You have decided to invest in an equally weighted portfolio consisting of American Express, Proctor & Gamble, Home Depot, and E. I. du Pont and need to find the beta of your portfolio. Go to finance.yahoo.com, find the ticker symb..
If the investor is evaluating this project assuming a yield of 10% per year. How much is the present value (investment) of this project.
What is the expected change in the price of the bond if interest rates are expected to decline by 0.5 percent?
Based on the following information: Rate of Return if State Occurs State of Probability of Economy State of Economy Stock A Stock B Recession .20 .06 − .20 Normal .55 .07 .13 Boom .25 .11 .33 Calculate the expected return for the two stocks.
Explain what it means for a firm to take advantage of a cash discount.
Assume no other activities occurred during the year. What was the net in one amount for the year?
You short sold 1,200 shares of stock at a price of $25 and an initial margin of 70 percent. If the maintenance margin is 30 percent, at what share price will you receive a margin call? What is your account equity at this stock price?
Compounding with Different Interest Rates (LG4-3) A deposit of $360 earns the following interest rates: 9 percent in the first year.
The next dividend payment by Tech Co., will be $2.08 per share. The dividends are anticipated to maintain a growth rate of 6 percent forever. If the stock currently sells for $42 per share, what is the required return?
calculate the current value of the remainder interest.
Calculate the expected return and standard deviation of a portfolio that is weighted 88% in the U.S. and 12% in Mexico.
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