Describe the result of the hedge

Assignment Help Finance Basics
Reference no: EM133072341

Q1. When JD bought the given portfolio she decided to hedge its value for one year in case the market will fall durng the year. JD used the S&P500 index futures (on CME) employing the minimum variance hedge ratio. The contract's dollar multiplier was $250 and the futures value was: F4,3,20; JUN21 = 2,912.43. When JD closed the futures position on 4,2, 21 the futures value was F4,2,21; JUN21 = 3,972.84. Using a complete time table show the entire hedge and describe the result of the hedge on 04.2 .21.

Q2. Suppose now that instead of the hedge that JD opened on 4.3.2020 she timed the market and speculated that the market trend is up. JD used the same data in Q3 to increase the beta of her portfolio by 4 points. I.e., Beta(Target)=Current portfolio Beta+4.

Use the S&P500 index futures to increase the beta of the JD's portfolio by 4 points and describe the result of this strategy a year later when JD closed her speculative position on 4. 2. 2021.

Reference no: EM133072341

Questions Cloud

Percentage of total variation of stock return : The covariance between stock i and the market .66%. The standard deviation of stock i is 8.90% and the standard deviation of the market is 11.20%.
What is the hpy on investment : The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realize
What is the hpy on investment : The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realize
Determine the budgeted purchases for this quarter : Coomb's Fashions forecasts sales of $133,000 for the quarter ended December 31. Determine the budgeted purchases for this quarter
Describe the result of the hedge : Q1. When JD bought the given portfolio she decided to hedge its value for one year in case the market will fall durng the year. JD used the S&P500 index fut
Explain the reasons for the new mortality trend : What types of epidemiologic research could help to explain the reasons for the new mortality trend?
Explain why an entrepreneur has no conflict : Explain why an entrepreneur has no conflict compare to a manager who is a worker of shareholders. Given 5 rea
Efficient market hypothesis : What is the main point of the efficient market hypothesis (EMH)?
Bond new price interest rates : What would be the bond's new price if interest rates suddenly increased by 1.51%? State your answer as a dollar amount with two decimal places.

Reviews

Write a Review

Finance Basics Questions & Answers

  How many payments are needed

Milton Investments borrowed $32 000 at 11% compounded semi-annually. The loan is to be repaid by payments of $4500 due at the end of every six months.

  Is this a valid statement to make

Your governor boasts that, under her watch, "the number of children without access to health care fell by one-quarter."-  Is this a valid statement to make? Why or why not?

  What is the real rate of return for a t-bill

US government T-bills had the nominal rates of return of 3.44 percent. What is the real rate of return for a T-bill?

  Calculate the required rate of return for company x

How do I Calculate the required rate of return for Company X., assuming that (1) investors expect a 3.0% rate of inflation in the future.

  Fina 6305 managerial finance assignment help

Suppose a State of Texas bond will pay $2,000 ten years from now. If the going interest rate on these 10-year bonds is 0.5%, how much is the bond worth today?

  Assume that elvira lehman desires to accumulate 1 million

consider the following independent situations.a mark yoders wishes to become a millionaire. his money market fund has

  What is the real rate of return for large-cap stocks

Large-cap stocks had the nominal rates of return of 13.12 percent. The rate of inflation during the last year was 2.26 percent. What is the real rate of return

  The progressive movement was a complicated

Background: The Progressive Movement was a complicated, and sometimes contradictory, phenomenon that sometimes pushed for the expansion of popular democracy while at other times, or even simultaneously, advocated that the functions of governmen..

  Capital structure components and computation with before

capital structure components and computation with before and after tax cost of capital - theory.cost of capital coleman

  What is dollar profit or loss per share

If you bought GM at $25.00 and sold it at $30.00, what is your dollar profit or loss per share (ignoring transaction costs)? What is your holding period return

  What is the break-even point for the investor

Ignoring commissions, if the option was purchased for a price of $.85, what is the break-even point for the investor on the put and the call respectively?

  Determine the mortgage today

A local Bank is offering a thirty year mortgage with an EAR of 5 3/8%. If we plan to borrow $150,000, what will our monthly payment be? You have decided to refinance your mortgage and plan to borrow whatever is outstanding on your current mortgage.

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!

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