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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.
Once you have finalized your new business idea, construct business style memo addressed to the Instructor.
Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2017 (figures in percent per year) are as follows.
which of the following statements about american options is incorrect?a. american options can be exercised at any time
Identify and discuss the risks associated with owning stock and the purpose of investment portfolios
how can you increase the sharpe ratio of a portfolio? what type of stocks would you have to add to it in order to do
In recent years there has been a contentious debate about whether same-sex couples should be allowed to legally marry. In 2004, the Congressional Budget Office.
Calculating WACC. Bargeron Corporation has a target capital structure of 75 percent common stock, 5 percent preferred stock, and 20 percent debt.
How does the net present value of the following net cash flows change with discount rate? What is the internal rate of return?
Calculate the effective cost (to the borrower) of the participation loan assuming the loan is held for 10 years. (Note that this is also the expected return to the lender.)
Clean Energy Resources Inc., a new division of a major battery manufacturing company, recently patented a new battery that uses zinc-air technology.
What is the difference in the Required Rate of Return and the Internal Rate of Return given the following information?
How would you correct each of the errors? Specifically, what actions would you take so that your trail balance would show the correct balances?
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