Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
A fund manager has a well-diversified portfolio that mirrors the performance of the S&P 500 and is worth $510 million. The value of the S&P 500 is 1,700, and the portfolio manager would like to buy insurance against a reduction of more than 5% in the value of the portfolio over the next six months. The risk-free interest rate is 6% per annum. The dividend yield on both the portfolio and the S&P 500 is 3%, and the volatility of the index is 30% per annum.
A. If the fund manager buys traded European put options, how much would the insurance cost?
B. Explain carefully alternative strategies open to the fund manager involving traded European call options, and show that they lead to the same result. (Hint: use put-call parity)
C. If the fund manager decides to provide insurance by keeping part of the portfolio in risk-free securities, what should the initial position be?
D. If the fund manager decides to provide insurance by using nine-month index futures, what should the initial position be?
Why are equity investment returns typically more than bond returns? A) Equities are riskier than bonds B) Bonds are riskier than equities C) Bonds pay interest payments D) Both A & C
What do you suggest as a cost-effective approach to capital budgeting analysis when a project contains real options
Determine if each of the following would be an operating expense or a capital expenditure.
The beta of a portfolio of stocks is:
Your investments increased in value by 11.1 percent last year but your purchasing power increased by only 8.4 percent. What was the approximate inflation rate?
A survey by Fitch Ratings found that capital market participants felt that Credit Default Swaps, a form of derivative contract that pays off if the named underlier defaults on its debt obligations, are both more important as indicators of counterp..
What material types of transactions and transaction cycles are involved and what are the high-risk areas - How does the company compare with others in the industry?
What is the payback period for a project with an initial investment of $180,000 that provides annual cash inflow of $40,000 for the first three years and $25,000 per year for years four and five, and $50,000 per year for years six through eight?
Celine Co. will need 500,000 in 90 days to pay for German imports. Today's 90-day forward rate of the euro is $1.07. There is a 40 percent chance that the spot rate of the euro in 90 days will be $1.02, and a 60 percent chance that the spot rate of t..
1. Evaluate the advantages and disadvantages of the various decision-making tools listed (e.g., regular payback, discounted payback, net present value (NPV), internal rate of return (IRR), and modified internal rate of return).
What was the original annual rate of return needed to reach your goal when you started the fund two years ago? With only $140,000 in the fund and 10 years remaining until your first child starts college, what annual rate of return would the fund ha..
The last dividend of delta, inc. was $8.15, the growth rate of dividends is expected to be 2.48 percent, and the required rate of return on this stock is 11.05 percent. What is the stock price according to the constant growth dividend model (Godron m..
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd