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Assume that you are an equity portfolio manager with a well-diversified portfolio valued at $2.5 million with a beta of 1.1, but you have a positive outlook on the short-term prospects of the stock market and want to increase your market risk using index futures by increasing your beta to 1.6. Assume that the S&P500 is trading at a price of 2655, the futures multiplier is $250, and the futures price is currently 2670.
How many contracts would you need to go long or short to adjust the portfolio to the desired beta?
Assume that the risk-free interest rate is 2% and the continuous market dividend yield is 2%. Furthermore, assume that 6-months later the index is trading at 2785 and the futures price is 2795. What is the value of the total position (equity portfolio plus gains or losses from the futures contract)?
What are some reasons that a futures contract cannot provide a perfect hedge to an equity portfolio in a situation like this?
A longer cash conversion cycle implies a(n)____ in firm liquidity
All of the statements regarding the taxation of insurance policies are correct, except:
Assume there are 30 days in each month. By how much will the firm’s collections exceed its payments for Quarter 3?
Hope invested $7200 in a mutual fund at a time when the price per share was $27. Hope's return on the no-load fund would be ___%
estimate the interest rate that the company will pay on its bonds. Assume that bondholders demand the same expected return as the bank.
ABC Bank originated a pool of containing 500 three-year fixed-rate mortgages with loan amount of $150,000 each. All mortgages in the pool carry a rate of 7% with annual payments. The guarantee and servicing fee is 1%. what is the price for each share..
Cecelia Thomas is a sales executive at a Baltimore firm. how much will she have in 40 years, when she turns 65?
You would like to estimate the weighted average cost of capital for a new airline business. what is your estimate of its WACC?
What is the price a prospective seller will receive if he sells the bond with the face value of $1000?
What the discount yield on a T-bill of $10,000,000 due in 62 days with a purchase price of $9,945,362.25? What is the bond equivalent yield on the security?
Consider a 15-year, 12 percent annual coupon bond with a required return of 8 percent.
You purchase one IBM March 120 put contract for a put premium of $10. The maximum profit that you could gain from this strategy is
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