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You hold a well diversified portfolio of stocks valued at $10 million whose beta is equal to 1.5. You intend to use S&P 500 futures to decrease the effective beta of your portfolio down to 0.5. The multiplier for S&P 500 contracts is $250 and the index is currently at 2,399 (futures price). Will you buy or sell futures contracts? How many contracts (report fractional contracts)? Assuming S&P 500 drops by 10% by the expiration date, please find (a) the new value of your stocks, (b) profit/loss on the futures position, (b) the new value of your overall hedged portfolio, and (c) the holding period return on your overall hedged portfolio.
Suppose the 90-day forward quotes on the Euro and the Danish kroner are $ 0.4002-10 and $0.1180-90, respectively. What is the direct 90-day forward quote for the kroner Frankfurt?
HBS, Inc. has a growth rate of 6 percent and is equally as risky as the market. The stock is currently selling for $15 a share. The overall stock market has a 12 percent rate of return and a risk premium of 9 percent. What is the expected rate of ret..
Invest $1,200 at the end of each year for the next ten years in an account that pays 10 percent annual interest and determine the account balance at the end of year 10.
A ten years maturity bond with a coupon rate of 6% is now selling at $977.22. What would be the current yield and capital gain yield for this bond in one year from now assuming the yield to maturity of this bond is unchanged?
GTB, Inc., has a 20 percent tax rate and has $53.00 million in assets, currently financed entirely with equity. Equity is worth $5 per share, and book value of equity is equal to market value of equity. The firm is considering switching to a 20-perce..
Once a company acquires 5% of the outstanding shares of a publicly held company, it must:
Suppose your company needs $13 million to build a new assembly line. Your target debt−equity ratio is 0.45. The flotation cost for new equity is 9 percent, but the flotation cost for debt is only 6 percent. What is your company’s weighted average flo..
According to the International Fisher Effect, the expected inflation rate in Japan for next year is 9.12 %
What is the cost of common equity?
use the calculator method to compute the exact yield to maturity.
Please describe the purpose of the Income Statement and the interrelationship between the income statement and the other major financial statements that we covered in this class. In your answer, please also address which financial statements should b..
You have just purchased a home and taken out a $490,000 mortgage. The mortgage has a 30-year term with monthly payments and an APR of 4.88%. How much will you pay in interest and how much will you pay in principal during the first year? How much will..
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