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Currently, a mutual fund manager wishes to hedge a portfolio that has a market value of $6,250,000 over the next three months using the S&P500 index futures with six months to maturity. The beta of the mutual fund portfolio is 1.50. The index futures price is 2,500. One index futures contract is on $250 times the index level. Please answer the following questions:
(1) What is the meaning of beta?
(2) What position (long or short) should the manger take? Please explain.
(3) How many contracts in the index futures contracts should the manager take to hedge the exposure to the stock market?
Calculate the merger premium and the exchange ratio:- What is the post-merger EPS?- Is there any evidence of dilution of ownership or earnings in either merger transaction?
Which one of the following methods of analysis ignores the time value of money?
Calculate the economic value added assuming its cost of capital is 10%.
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Convert the two expected values to certainty equivalents. What discount rates should be used for the period 1 and period 2 cash flows?
What business concept would be appropriate for a sole proprietorship, a corporation, and a limited liability company, respectively? If you were opening your dream business, what structure would you select? Why?
A financial planning service offers a college savings program. The plan calls for you to make six annual payments of $13,500 each, with the first payment occurring today, your child’s 12th birthday. What return is this investment offering?
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