Well diversified portfolio of stocks valued

Assignment Help Financial Management
Reference no: EM131556668

You hold a well diversified portfolio of stocks valued at $10 million whose beta is equal to 1.5. You intend to use S&P 500 futures to decrease the effective beta of your portfolio down to 0.5. The multiplier for S&P 500 contracts is $250 and the index is currently at 2,399 (futures price). Will you buy or sell futures contracts? How many contracts (report fractional contracts)? Assuming S&P 500 drops by 10% by the expiration date, please find (a) the new value of your stocks, (b) profit/loss on the futures position, (b) the new value of your overall hedged portfolio, and (c) the holding period return on your overall hedged portfolio.

Reference no: EM131556668

Questions Cloud

What is diane current monthly mortgage payment : HOME REFINANCING Five years ago, Diane secured a bank loan of $300,000 to help finance the purchase of a loft in the San Francisco Bay area.
High-end market research firm has contacted : A high-end market research firm has contacted your boss and is trying to sell some business to your organization.
What is the schedule variance : At the end of the first three weeks of work, 160,000 AED has been spent, and five km of road have been completed. What is the schedule variance?
Company changes in net working capital : What was the company's 2013 changes in net working capital.
Well diversified portfolio of stocks valued : You hold a well diversified portfolio of stocks valued at $10 million whose beta is equal to 1.5. find new value of your stocks, profit/loss on futures position
Discuss two additional issues in analyzing foreign projects : Discuss the two additional issues in analyzing foreign projects.
Effective price they pay in october when hedge is lifted : Then find the effective price they pay in October when the hedge is lifted. Express your answer in dollars and cents per bushel.
Potential challenge or downside to merger : Which of the following is NOT a potential challenge or downside to a merger?
The dividend in one year to justify its current price : What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current price?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the irr for the new line of shoes

The Shoe Store has decided to sell a new line of shoes that will have a selling price of $79 and a variable cost of $38 per pair. The company spent $187,000 for a marketing study that determined the company should sell 112,000 pairs per year for five..

  What is npv-oxygen optimization would compute for project

A number companies, Including Lichfield Design and Oxygen Optimization are considering undertaking project A which is believed by all to have a level of risk that is equal to that of the average-risk protect at Litchifield design. What is the NPV tha..

  Difference between highest and lowest effective annual rates

Tillyard Inc. requires a $25,000 1-year loan. The bank offers to make the loan, and it offers three choices: (1) 15 percent simple interest, 9 percent add-on interest, 12 end-of-month payments. The first two loans would require a single payment at th..

  Determine optimal ordering frequency

Determine Optimal ordering frequency.- Average inventory and annual carrying costs.- Reorder point.- Amount of safety stock, in units.

  What rate of return is the market offering

A bond issued by the Harris Corporation has a coupon rate of 9 ¼ percent. It matures in 2035. If the price in the market is selling for $1,055.00, should you buy this bond? What rate of return is the market offering?

  Bonds on the market making annual payments

Kiss the Sky Enterprises has bonds on the market making annual payments, What must the coupon rate be on the bonds?

  Compute tin-macaulay duration

Consider a 15-year mortage with annual installments. The effective annual rate of interest is 6%. Compute tin- Macaulay duration if the mortgage is prepaid immediately after the third regular payment in made.

  What must expected return on market be

A stock has an expected return of 13.5 percent, its beta is 1.15, and the risk-free rate is 4 percent. What must the expected return on the market be?

  Number of tables and chairs to produce to maximize profit

A small furniture manufacturer produces tables and chairs. Each product must go through three stages of the manufacturing process: assembly, finishing, and inspection. Each table requires 3 hours of assembly, 2 hours of finishing, and 1.5 hour of ins..

  State clearly investment in the riskless cash fund

Obtain Hypatia's new allocation of her inheritance to the (now) six funds.  - State clearly investment in the riskless cash fund and describe in detail the tangency portfolio.

  Is there a relationship between revenue and avg points

Using Exhibit 2 and Multiples Analysis, is Tottenham Hotspur overvalued or undervalued if you use the Enterprise Value to Revenue multiple? Explain your answer. Is there a relationship between Revenue and "Avg. Points" or "Avg. Net Goals"

  What is the implied coupon

If the promised payment on the bond is the same as the issue price of $100, what is the implied coupon if effective interest rates are 3.0% and the bond has a 1-year maturity?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd