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A fund manager has a portfolio worth $120 million. The beta of the portfolio is 2.0. He plans to use futures contracts on S&P 500 to hedge risk over the next 3 months. The current index level is 1,005, the risk free rate is 4% per annum compounded quarterly, and the dividend yield is 1% per annum (or 0.25% per quarter). The multiplier of the futures contract is $250 times the index and the current 4-month futures price 1,015. The index after 3 months is 908 and the 1-month futures price is 910. How many futures contracts should the fund manager have trade in and what is the value of his portfolio including the gains or losses on the futures contracts?
Why might an accounting-based control system provide headquarters management with biased information about the performance of a foreign subsidiary? How can these biases best be corrected?
How has the research of behavioral economics influenced public policy? What a few concrete examples of how policymakers have attempted to use the principles of behavioral economics to change people's behavior. Should the government have a role in ..
A 11?-year bond pays interest of $ 26.50 ?semiannually, has a face value of $ 1, 000, and is selling for $ 782.65. What are its annual coupon rate
Examine the gift tax consequences of the transaction based on the use of the irrevocable trust, as compared to direct payments to the grandchildren.
Consider two small open economies that maintain fixed exchange rates and are linked to world capital markets under conditions of imperfect capital mobility. Suppose that the two economies are otherwise identical, except that capital flows (portfolio ..
However from the economics perspective, free riding is always problematic. Housing becomes public good when it is non-excludable
Alice has convex preferences over consumption bundles containing goods x and y. Where (x, y) is the consumption bundle, Alice’s preferences are as follows: (5, 2) ∼ (4, 2) ? (3, 2) ∼ (3, 5) ∼ (3, 6). Write a utility function that can represent Alice’..
q1. suppose that bargaining as envisioned by the coase theorem can take place and that the homeowners initially hold
Find three examples of the strategic responses of individual businesses to globalization and changes in the currency exchange rates. Create a table that compares and contrasts how each firm is reacting to the changing business environment and answer ..
Economies of scale may arise from all but one of the following. Which one is it?
What are the two basic strategies to motivate adoption? Give information on each.
Define and explain the expected value rule and mean-variance rule. How they would be useful to manager in business?
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