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1. A company knows that it is due to receive a certain amount of a foreign currency in four months. What type of option contract is appropriate for hedging?
2. ‘‘Options and futures are zero-sum games.’’ What do you think is meant by this statement?
3. Explain why collateral requirements will increase in the OTC market as a result of new regulations introduced since the 2008 credit crisis.
4. The forward price of the Swiss franc for delivery in 45 days is quoted as 1.1000. The futures price for a contract that will be delivered in 45 days is 0.9000. Explain these two quotes. Which is more favorable for a trader wanting to sell Swiss francs?
5. Does a perfect hedge always succeed in locking in the current spot price of an asset for a future transaction? Explain your answer.
6. On July 1, an investor holds 50,000 shares of a certain stock. The market price is $30 per share. The investor is interested in hedging against movements in the market over the next month and decides to use the September Mini S&P 500 futures contract. The index futures price is 1,500 and one contract is for delivery of $50 times the index. The beta of the stock is 1.3. What strategy should the investor follow?
What is the expected return on the stock based on the CAPM?
Assuming that Brandlin designates the forward contract as a cash flow hedge of a foreign currency receivable and recognizes any premium
Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt. Vandell's debt interest rate is 7%. Assume that the risk-free rate of interest is 6% ..
The goal of unlimited estate tax martial deduction is to treat the spouses as one unit for transfer tax purposes
Elizabeth’s Debt Payment/Income ratio is:
The covariance of the returns between Willow Stock and Sky Diamond Stock is 0.0860. The variance of Willow is 0.1440, and the variance of Sky Diamond is 0.1020. What is the correlation coefficient between the returns of the two stocks?
How much will Bill's insurance company pay? How much will Bill be required to pay directly?
How do you think the yield curve will change during this time? Offer some logic or current reference(s) to support your answers.
Janice plans to save 75$ per month, starting today, for 20 years. Kate plans to save 80$ a month for 20 years, starting one month from today. Both Hanice and kate expect to earn an average return of 5.5 percent on their savings. At the end of the 20 ..
Identify three main components of an expected return on a risky investment.
If you are buying and selling stock, how would you include the dividends you earned? For eample if I want to sell my stock after two weeks and my dividend is $1.50 & I just sold my stock and made $50.00. Would I add $1.50 to my earnings or do I have ..
If the sales data from 2009-2013 had been 1024, 1499, 1589, 1823, and 1950 using linear regression - what would the projected sales figure for 2014 be? What assumption is made when you use Linear Regression for projecting next year's sales? Is this a..
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