Reference no: EM132196522

Essay Questions:

1. Suppose your wealthy Uncle Bertie has asked you to manage her large stock portfolio. You would like to buy and/or sell options on many of the stocks he owns.

Describe the types of options you would buy or sell, as well as your rationale, draw pay off charts (graphs) given the following circumstances:
a. Uncle Bertie owns 20,000 shares of Ford common stock. You believe it is going to fall in price, but he won't let you sell it because hi slate wife told him never to let it go. How do you protect him from the impending price decline?
b. Your analysis suggests that the common stock of Chevron is poised to increase in value sharply over the next year. Uncle Bertie doesn't want to buy any of the stock, but does want you to use options to profit if the price rises. What do you do?
c. Although Uncle Bertie doesn't want you to sell any of the stocks he owns, he would like you to use options to generate a little extra income. How might you do this?

2. Discuss what a Dutch auction is and how it works.

3. What are venture capitalists and what is their role in raising capital for firms?

4. Assume that you can buy 250 Canadian dollars with 100 British pounds. Show how advantage can be taken by triangular arbitrage if given the following exchange rates? Assume that you start out with British pounds. Show the work.

COUNTRY    US $ Equivalent               Currency per US $
Canada                ?                                    1.3500

U.K                   1.8305                               ?Top of Form