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You are a portfolio manager who has just discovered the possibilities of stock-index futures. Assume that you have the resources to buy and hold the stocks in the S&P 500. Any day between February 24 and March 1, obtain the current level of the S&P 500 index and the price of the June 2016 S&P 500 futures contract trading on the CME. On that same day obtain the annualized rate on the T-bill expiring closest to June 2016. Assume the annualized dividend yield on S&P 500 stocks is 2.04% and that dividends are paid out continuously over the year. Is there a potential for arbitrage, and, if so, how would you go about setting up the arbitrage? (Please cite all your sources). You may obtain the level of the S&P 500 from Yahoo Finance and T-bill rates from the US Treasury website and other sources.
A woman of a large Japanese company has purchased 16,000 widgets from you. The USD value of the widgets is $16,000. Terms of payment are NET 90. The exchange rate at the time of billing/invoicing USD1=80 yen. Her bank pays you via electronic funds tr..
You manage an equity fund with an expected risk premium of 10.6% and a standard deviation of 20%. The rate on Treasury bills is 6%. Your client chooses to invest $50,000 of her portfolio in your equity fund and $50,000 in a T-bill money market fund. ..
A frequent criticism of the management of publicly-owned American companies is that they are too short-term oriented, too focused on fast returns, and that this negatively impacts their long term capital budgeting.
Which of the following statements about calculating the number of years needed to grow an investment to a specific amount of money is true?
The spot rate for the Japanese yen currently is ¥107 per $1. The one-year forward rate is ¥106 per $1. A risk-free asset in Japan is currently earning 7 percent. If interest rate parity holds, what rate can you earn on a one-year risk-free U.S. secur..
Rancco reported total sales of $73 million last year including $13 million in revenue (labor, sales to tax-exempt entities) exempt from sales tax. the company collects sales tax at a rate of 5%. in reviewing its information as part of its loan applic..
On May 10, a company issued for cash 2,000 shares of no-par common stock (with a stated value of $4) at $17, and on May 15, it issued for cash 3,000 shares of $17 par preferred stock at $61. Journalize the entries for May 10 and 15, assuming that the..
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.4 million. The fixed asset falls into the three-year MACRS class
1) Double taxation of corporate profits refers to: 2) Social enterprises emphasize:
X company purchased equipment providing an annual savings of $20000 over 10 years. Assuming an annual discount rate of 10%, what is the present value of the savings using an ordinary annuity and an annuity due?
Heginbotham Corp. issued 20-year bonds two years ago at a coupon rate of 8.9 percent. The bonds make semiannual payments. If these bonds currently sell for 110 percent of par value, what is the YTM?
You believe you will need to have saved 500,000$ by the time you retire in 40 years in order to live comfortably. if the interest rate is 6% per year, how much must you save each year to meet your retirement goal? a couple thinking about retirement d..
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