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A well-diversified stock portfolio has $40m value, and a beta 1.22 relative to S&P 500 index. The portfolio manager anticipates a bearish horizon. Instead of liquidating, he or she sells N contracts of S&P 500 stock index futures. Suppose one futures contract = $500 futures price in points or notional value. Suppose the S&P 500 futures price is now 1500 points. Suppose the rate of change of the S&P 500 index is the same as the rate of change of the futures index. What is N if the manager wants to hedge perfectly?
What is the Total Cash Flow in Year 8 of the project if the equipment can be sold for $5,711 and the tax rate is 25%?
The YTM (yield to maturity) on a bond is the interest rate you earn on your investment if interest rates don’t change.
Compute the present value of your prize assuming a discount rate of 13 percent per annum.
Stock X has a 10% expected return, a beta coefficient of 0.9, and a 35% standard deviation of expected returns. Stock Y has a 12.5% expected return, a beta coefficient of 1.2, and a 25% standard deviation. Calculate each stock’s coefficient of variat..
Based on the information above, determine Dave Solomon's net capital gain or net capital loss for the year ended 30 June of the current tax year. If Dave has a net capital gain, what does he do with this amount? If Dave has a net capital loss, what d..
A bond currently sells for $1,010, which gives it a yield to maturity of 4%. Suppose that if the yield increases by 30 basis points, the price of the bond falls to $980. What is the duration of this bond?
What are some factors that affect capital structure decisions made by management? Does capital structure influence the value of a firm?
Pembroke Co. wants to issue new 20-year bonds for some much needed expansion projects. The company currently has 8 percent coupon bonds on the market that sell for $983, making annual payments, and mature in 20 years. What coupon rate should the comp..
Bejeweled, a chain of crafting shops, is selling 500,000 shares of stock in an auction IPO. At the end of the bidding period they have received the bids shown above. Which of the following is closest to the price at which the shares will be offered?
You and your lifelong friend are partners together in the promotional materials business.
Felicia & Fred are considering the introduction of a new product line of jewelry featuring crystals imported from the Czech Republic. The manufacturing plant offers crystals in all colors, sizes, and shapes cut to the design specifications of their c..
A call option is currently selling for $6.40. It has a strike price of $55 and six months to maturity. A put option with the same strike price sells for $7.40. The risk-free rate is 5.3 percent, and the stock will pay a dividend of $2.70 in three mon..
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