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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.
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..
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..
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.- Average inventory and annual carrying costs.- Reorder point.- Amount of safety stock, in units.
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?
Kiss the Sky Enterprises has bonds on the market making annual payments, What must the coupon rate be on the bonds?
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.
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?
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..
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.
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"
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?
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