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You are managing a hedge fund. Today, you find that the stock of Microsoft is undervalued. So, you would want to buy Microsoft stocks. But you know that buying the stocks only will make you exposed to risk even if the stock is actually undervalued. So, you would sell short the S&P 500 index. How would you decide how much of the index you would sell short? Even if all the assumptions and the necessary estimates are correct, you are still exposed to some risk. What is the remaining risk in the above strategy?
How to determine the amount of selling:
Remaining risk:
What is the difference between active and passive bond portfolio management? Give some examples of each.(Investments)
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A firm had a ledger balance of $4,122 with no outstanding deposits or checks. Today, your firm deposited 4 checks in the amount of $466 each and wrote a check in the amount of $969. What is the amount of the collection float as of the end of the day?
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If Boyd Corp. has sales of $2 million per year (all credit) and a collection period of 35 days, what is its average amount of accounts receivable outstanding?
The operating and maintenance expenses for a mining matching are expected to be $11,000 in the first year and increase by $800 per year during the 15-year life of the machine. What uniform series of payments would cover these expenses over the life o..
Extremely high P/E multiples were observed in the market several years ago, especially for technology firms. How can you explain the fact that firms with very low earnings or no earnings are valued in the market as a being with billions of dollars? H..
An investor in the 20% Marginal tax bracket is looking at buying Harrisburg, PA notes. The Yield is 4.25% on the notes. What is the Taxable Equivalent Yield?
Your new born child will be starting college in 18 years. You expect your child's college education to cost $24,930 per year, due at the beginning of each year. How much must you set aside at the end of each year for your child to attend four years o..
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