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The gamma and vega of a delta-neutral portfolio are 75 per $ and 15 per %, respectively. What will happen to the value of the portfolio when there is a shock to the market causing the underlying asset price to decrease by $4 and its volatility to increase by 5%?
A. The value of the portfolio will decrease by $600.75.
B. The value of the portfolio will decrease by $675.
C. The value of the portfolio will increase by $600.75.
D. The value of the portfolio will increase by $675.
Using the Yahoo Finance site or other site with stock information, choose six firms: two each from three different industries. Gather the following information for each stock: 1) beta for each of these firms; and 2) the total return for the previous ..
A two year European call option, with a $140 strike price on a stock whose current value is $100, trades at $52 and a two year European put option with the same strike price trades at $86. The expected rate of return on the stock over the next year i..
Analysts forecast that Dixie Chicks, Inc. (DCI) will pay a dividend of $2.50 a share now, continuing a long-term growth trend of 10% per year. If this trend is expected to continue indefinitely, and investors' required rate of return for DCI is 12%: ..
We are evaluating a project that costs $800,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 60,000 units per year. Price per unit is $40, va..
HydroTech Corp stock was $50 per share a year ago when it was purchased. Since then, it paid an annual $4 per share dividend. The stock price is currently $55. If you owned 500 shares of HydroTech, what was your percent return?
Fooling Company has a 11.8 percent callable bond outstanding on the market with 25 years to maturity, call protection for the next 10 years, and a call premium of $50. What is the yield to call (YTC) for this bond if the current price is 108 percent ..
$200,000 of 6%, 25-year bonds were sold for $190,000 on January 1. The bonds require semi annual interest payments on June 30 and December 31. What is the journal entry to record the June 30 interest payment on the bonds?
Why do higher marketing variable costs not increase total variable costs on the income statement? Select One Save Answer A. Marketing costs are considered period costs on the income statement
Patton Paints Corporation has a target capital structure of 35% debt and 65% common equity, with no preferred stock. Its before-tax cost of debt is 12% and its marginal tax rate is 40%. The current stock price is P0 = $33.00. The last dividend was D0..
What will your outlook towards maintenance of liquid assets to ensure that the firm has adequate cash in hand to meet its obligations at all times?
You make the following forecasts about the returns of a stock: in a recession (probability 40%) the stock's return is -6%, in a boom (probability 60%) the stock's return is 10%. What is the expected return for this stock? Total investment in stock A ..
Momsen Corp. is experiencing rapid growth. Dividends are expected to grow at 25 percent per year during the next three years, 15 percent over the following year, and then 8 percent per year indefinitely. The required return on this stock is 14 percen..
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