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It is Jan 31, you expect to sell your stock portfolio 3 months later on April 30. Today the portfolio worths $1 million. And today, price of the April stock index futures is $20000 whereas the May stock index futures is $25000. At the end of April, the value of your stock portfolio becomes $700000. The price of the April stock index futures contract becomes 14000 whereas the price of the May stock index futures becomes 20000. Please calculate the overall profit or loss at the end of April if you had hedged your portfolio with the appropriate futures (correctly chosen) using a simple naive hedge.
Hook Industries' capital structure consists solely of debt and common equity. It can issue debt at rd = 9%, and its common stock currently pays a $3.25 dividend per share (D0 = $3.25). The stock's price is currently $21.75, its dividend is expected t..
What is the option in a callable agency bond? What impact does the call deferment period have on a callable bond's promised yield? What is the primary advantage of a discount callable bond versus one trading at par?
Bill Dukes has $100,000 invested in a 2-stock portfolio. $35,000 is invested in Stock X and the remainder is invested in Stock Y. X's beta is 1.50 and Y's beta is 0.70. What is the portfolio's beta?
Currency risk management techniques include forward hedges, money market hedges, and option hedges. Draw a diagram showing the possible outcomes of these hedging alternatives for a foreign currency receivable contract.
Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.78 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. The firm has a target debt−equity ratio..
Seattle Health Plans currently uses zero debt financing. Its operating profit is $1 million, and it pays taxes at 40 percent rate. It has $5 million in equity. Suppose the firm is considering replacing half of its equity financing that bears an inter..
What is the yield to maturity of a 23 year bond that pays a coupon rate of 8.25% per year and has $1,000 par value and is currently priced at $1,298.05. Assume semi-annual coupon payments. Round the answer to two decimal places in percentage form.
The April 21, 2015 University Press reported that faculty salaries rose an average of 3.1% in the past year, but after adjusting for inflation, there was actually an average decrease of 0.3%. What was the rate of inflation?
Waldrop Corporation must install $200 of new equipment in its Ohio plant. It can obtain a bank loan for 100% of the required amount at 9% interest on the loan. Alternatively, the firm can leas the equipment on a 2-year lease, the payment would be $11..
Discuss John's possible liability under the Theft Act.
A SPREAD is an investment strategy that involves the simultaneously buying and selling equal number of options on the same underlying security but with different strike prices
The Zombie Corporation’s common stock has a beta of 1.3. If the risk-free rate is 4.4 percent and the expected return on the market is 10 percent, what is the company’s cost of equity capital?
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