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You want to invest $1 million in the S&P 500 index for one year. There are two ways to go about it. You could actually buy all the stocks in the index according to their index investment weights, or you could buy an S&P index futures contract (and put the $1 million in a risk-free investment for one year). The S&P index is now at 350, and an S&P index future with a one-year maturity is selling at 355. The riskless rate is 8%, and the dividend yield on the S&P index is 6%. Assume that the S&P contract size is equal to the index, and that all cash flows to the future occur at maturity (i.e., there is no daily resettlement).
Question1: Discuss whether the following statement is true or false: "The relationship between futures price and the expected future spot price of an underlying asset depends on the systematic risk of the underlying asset." Please support the answer mathematically.
Question2: In your own words, critically discuss how margin accounts protect investors against credit risk.
Question - What is the importance of incremental cash flow, why it is required in the capital budgeting process
The opportunity requires an initial investment of $6,000 plus and additional investment at the end of the second year of $30,000.
A stock price is currently $70. Over each of the next two three-month periods, it is expected to go up by 8% or down by 6%. The risk-free rate is 4% per annum with continuous compounding. What is the value of a six-month American put option wi..
The intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years.
f market interest rates are expected to decline over time, will a savings institution with rate-sensitive liabilities and a large amount of fixed-rate mortgages perform best by using an interest rate swap.
Goldman, Sachs, and Co.: Nikkei Put Warrants-1989 (Harvard Business School Case 292113-PDF-ENG). The case illustrates how investment banks can design.
The stock's required rate of return is 15%. If you are an analyst who believes in efficient markets, what is your forecast of g?
The debt and equity option would consist of 15,000 shares of stock plus $255,000 of debt with an interest rate of 8 percent. What is the break-even level of earnings before interest and taxes between these two options? Ignore taxes.
Given below is information related to copyrights owned by Yaeger Company at December 31, 2004:
Calculate the percentage change in the warrants' floor value for a ± 1 5-percent change in the market price of the shares.
1. what would be the cost of retained earnings equity for tangshan mining if the expected return on u.s. treasury bills
How much money will Tom and Tricia have in 45 years if they do nothing for the next 10 years, then put $1800 per year away for the remaining 35 years?
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