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 fixed income money manager has a bond portfolio with a 70 percent allocation to longterm bonds and a 30 percent allocation to short-term bonds. The portfolio is currently valued at $75 million. The manager wishes to reduce the long- term bonds allocation to 55 percent and increase the short-term bonds allocation to 45 percent for a period of three months. The modified duration of the long-term bonds is 7.5 and of the short-term bonds is 4.5.
A bond futures contract that expires in three months is priced at $95,750 and has a modified duration of 6.25. Assume that the modified duration of cash equivalents is 0.25. Also assume that interest rates that drive long-term and short- term bond prices have a yield beta of 1 with respect to interest rates that drive the bond futures market.
A. Show how the manager can achieve his goals by using bond futures. Indicate the number of contracts and whether the manager should go long or short.
B. After 2 months (not three, but two), the short-term bonds are down 5.63 percent and long-term bonds are down 9.38 percent. The bond futures price is $88,270.
B1. What is the value of a re-balanced portfolio?
B2. What would have been the value of the portfolio without rebalancing?
Valuation – options. The following information refers to a six-month call option on the stock of XYZ, Inc. What is the intrinsic value of the option? What is the option’s time premium at this price?
Your company has been approached to bid on a contract to sell 4,900 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. Additionally..
Evil Pop, Inc., has an average collection period of 50 days. Its average daily investment in receivables is $44,300. Assume 365 days per year. What is the receivables turnover?
Which will encourage a firm to increase the debt in its capital?
Suppose that a firm must choose between two mutually exclusive projects, both of which have negative NPVs. Explain how a firm can legitimately choose among two such projects.
Suppose that the inflation rate is 2.5% and the real terminal value of an investment is expected to be $20,000 in 2 years. Calculate the nominal terminal value of the investment at the end of year 2.
Consider a 1-period binomial model with R=1.02, S0=100, u=1/d=1.05. 1.Compute the value of a European call option on the stock with strike K=102. The stock does not pay dividends. 2.When you construct the replicating portfolio for the option in the p..
Discuss the different methods a multinational firm can take in managing its foreign currency exposure.
CRM, Inc. went public one year ago. The company is still in the growth stage, and is expecting supernormal growth of 40% for the next two years before achieving a long-run growth rate of 6%. The stock just paid a dividend of $5.00. If investors’ requ..
A lot of customers use payment cards when purchasing items online. Identify the advantages and disadvantages for both the company and the customer in using payment cards for purchases. Due to phishing attacks online, identity theft is prevalent. Desc..
Why is the coefficient of variation a better risk measure to use than the standard deviation when evaluating the risk of capital budgeting projects?
An investor purchases a call on a stock, with an exercise price of $45 and premium of $3, and a put option with the same maturity that has an exercise price of $45 and premium of $2. Please draw a payoff diagram and a profit diagram for the ‘straddle..
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