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Hedging with Index Futures. Jill manages a stock portfolio valued at $50 million on August 15. The beta of her portfolio is 0.9. Jill wants to hedge her portfolio's market risk for the next three months, using S&P 500 index futures. The December index futures is 1,150 on August 15 (each index point is worth $250). The December futures will expire in four months. The dividend yield of the S&P 500 is 2.5% and the riskless interest rate is 1%, both per annum. (a) To fully hedge her portfolio, how many of the December S&P 500 futures contracts should Jill long or short? (b) Three months later, on November 15, Jill's portfolio is valued at $45 million while the December S&P 500 futures is 1,020. What has been the net profit (loss) of her hedged portfolio in part (a)? (c) Suppose on August 15, the spot S&P 500 index is also 1,150 (the same as its December futures). Is there an opportunity for index arbitrage on this day? Why?
Christina Haley of San Marcos, Texas, age 61, recently suffered a severe stroke. She was in intensive care for twelve days and was hospitalized for 18 more days.
straight-line depreciation to zero over the four-year life; zero salvage value; price = $22; variable costs = $12; fixed costs = $160,000; quantity sold = 82,000 units; tax rate = 32 percent.
The federal reserve monetary controll the open market. what is the open market operation? What is its goals?
Find the monthly payment needed to pay off a loan of $3800 amortized at 6% compounded monthly for 4 years.
Compute Soundbytes’ enterprise value and its EBITDA multiple. Compute Hagar Enterprise’s EBITDA.
Explain how the Wal-Mart outlets in China would use the spot market in foreign exchange. Explain how Wal-Mart might utilize the international money markets when it is establishing other Wal-Mart stores in Asia. Expalin how Wal-Mart could use the inte..
Computation efficient frontier for strategic decision and Plot the graph of the resulting portfolio returns and standard deviations
Solve using the straight line method, The following transactions were completed by Simmons Inc., Whose fiscal year is the calendar year:
After that, the company has stated that the annual dividend will be $1.25 per share indefinitely. What is this stock worth to you per share if you demand a 10.8 percent rate of return on stocks of this type?
Suppose you found that you can make above normal returns if you buy oil-company stocks just before noon on any given trading day, and sell them immediately before the market closes that same day.
Calculate Patrick's WACC using market value weights. Round your answer to two decimal places.
Use 2 transactions in recent financial news to illustrate and explain the roles of financial intermediaries, and banks in particular, in these transactions.Furthermore, explain how these transactions would occur without a financial intermediary.
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