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1. You wish to hedge a $10 million stock portfolio with a portfolio beta equal to 1. What hedging transaction is required to hedge the stock portfolio? Specify the type of option and how many you need to buy or sell.
2. Bond valuation Lahey Industries has outstanding a $1,000 par-value bond with an semi annual coupon interest rate. The bond has 12 years remaining to its maturity date with YTM 10%. If current value of bond is $920 a. If interest is paid semi annually, find the annual coupn rate?
3. A three month 80 put has a gamma of 0.0078 and a vega of 5.8837. The three month 120 call has a gamma of 0.0083 and a vega of 4.140. Suppose you target a vega of 0.5 and a gamma of -0.5. Determine the positions in these options that meet your targets.
Maximum Buying Price - using calls as insurance against rising prices Bill is an Illinois hog producer.
Fairfax Paint just borrowed 66,800 dollars. The terms of the loan require the company to make equal semi-annual payments forever. The first semi-annual payment is due in 6 months. If the regular semi-annual loan payment is 4,800 dollars, then what is..
Flotation costs: are amortized using a declining-balance method over the life of the loan. Are deducted as a business expense at time the loan is repaid in full
How much is the principle reduction the first year of the loan?
Groups who challenge stadium financing proposals make three primary legal arguments.
The following is from Harrlson Incs financial statements. Sales (all on credit)were $28.50 millions for 2013 Sales to total assets 1.90 times Total Debt to Total Assets 35% Current Ratio 2.50 times Inventory Turnover 20 days Average Collection period..
Calculate the annual depreciation tax shield is the firm's tax bracket is 35%.
Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $0.50 coming 3 years from toda..
No More Pencils, Inc., disburses checks every two weeks that average $83,000 and take six days to clear. How much interest can the company earn annually if it delays transfer of funds from an interest-bearing account that pays .011 percent per day fo..
The portion of the Federal Insurance Contributions Act (FICA) tax paid by employers is 7.65 percent and the portion paid by employees is 7.65 percent (for a total of 15.3 percent). Suppose that absent FICA taxes, workers receive a competitive equilib..
Your cousin is currently 12 years old. She will be going to college in 6 years. Your aunt and uncle would like to have $100,000 in a savings account to fund her education at that time. If the account promises to pay a fixed interest rate of 4% per ye..
As indicated in the video, nearly $1 billion was invested in the development of the Meadow Lake Wind Farm. Assuming 25% of those dollars were spent locally and subject to Indiana’s sales tax, calculate the actual sales made locally.
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