Write to effectively hedge your portfolio

Assignment Help Financial Management
Reference no: EM131315792

1. BB Industries receives an invoice dated November 18 for $2,250.00 with credit terms of 3/15, 2/25, N/45. A 5 1/4% penalty is charged for payments made after 45 days. Assuming payment is made on January 3, the amount due is:

a. $2,250.00

b. $2,368.13

c. $2,205.00

d. $2,182.50

e. None of the above

2. You have an equity portfolio valued at $1.55 million that has a beta of 1.21. You have decided to hedge this portfolio using SPX call option contracts. The S&P 500 index is currently 1457. The option delta is .6435. How many option contracts must you write to effectively hedge your portfolio?

18 contracts

20 contracts

28 contracts

25 contracts

14 contracts

Reference no: EM131315792

Questions Cloud

Calculate the monthly repayment and the remaining loan : Luke borrows $800,000 from ANZ to set up a medical practice. He agrees to pay a fixed interest rate of 12% per annum compounding monthly and to repay by equal monthly instalments over 20 years. Calculate the monthly repayment and the remaining loan a..
Considering two savings options : You are considering two savings options. Both options offer a 4% rate of return. The first option is to save $1,200, $1,500, and $2,000 a year over the next three years, respectively. The other option is to save one lump sum amount today. If you want..
Why should capital budgeting for subsidiary pro­jects : Why should capital budgeting for subsidiary pro­jects be assessed from the parent’s perspective? What additional factors that normally are not relevant for a purely domestic project deserve consideration in multinational capital budgeting?
Ow much money will you receive if you redeem all of shares : Seven years ago, you purchased 216.34 shares of a mutual fund. Since then, you have reinvested your fund dividends and acquired an additional 31.02 shares. The fund currently has an NAV of $38.06. How much money will you receive if you redeem all of ..
Write to effectively hedge your portfolio : BB Industries receives an invoice dated November 18 for $2,250.00 with credit terms of 3/15, 2/25, N/45. A 5 1/4% penalty is charged for payments made after 45 days. Assuming payment is made on January 3, the amount due is: You have an equity portfol..
Premium bond making semiannual payments : Bond X is a premium bond making semiannual payments. The bond pays a 7 percent coupon, has a YTM of 5 percent, and has 19 years to maturity. Bond Y is a discount bond making semiannual payments. What is the price of each bond today?
What is the present value of the payments : Suppose you are going to receive $10,000 per year for five years. The appropriate interest rate is 10 percent. What is the present value of the payments if they are in the form of an ordinary annuity? Suppose you plan to invest the payments for five ..
What are the potential benefits for this firm : Starter Corp. of New Haven, Connecticut, produces sportswear that is licensed by professional sports teams. It recently decided to expand in Europe. What are the potential benefits for this firm from using DFI?

Reviews

Write a Review

Financial Management Questions & Answers

  Calculate estimate of percent price change due to durration

A 6.5% coupon bearing bond that pays interest semi-annually has a yield to maturity of 4.8% per year. If the bond has a duration of 11.4 years and the market yield decreases 90 basis points, calculate an estimate of the percent price change due to du..

  Expected cash flow stream

You have been asked to analyze the following potential project. The expected cash flow stream is $20,000 for year 1 with an expected 4% growth rate per year for the next 3 years. If your cost of capital is 10%, how much would you be willing to invest..

  Taxable income-tax liability and tax refund or tax owed

Mary Watson is 24 years old and single lives in an apartment and has no dependents. Last year she earned 45,000 as a sales assistant for focus to business analytics: $3910 of her wages was withheld for federal income taxes. In addition, she had inter..

  Business reported the changes in working capital

A house painting business had revenues of $17,600 and expenses of $10,600 last summer. There were no depreciation expenses. However, the business reported the following changes in working capital:

  Increase the current value of a stock

Which one of the following will increase the current value of a stock?

  Determine the probability that the ending value

At other casinos, the dealer is required to take a hit on soft 17, but must stay on all other hands with a value of 17, 18, 19, 20, or 21. For this situation, determine the probability of the ending value of the dealer's hand.

  What is the investments profitability index

Your firm is considering an investment that will cost $920,000 today. The investment will produce cash flows of $450,000 in year 1, $270,000 in years 2 through 4, and $200,000 in year 5. The discount rate that your firm uses for projects of this type..

  What is the initial cash flow

A call with a strike price of $70 costs $7.38. A put with the same strike price and expiration date costs $3.56. If you create a straddle, what is the initial cash flow? If it's a cash outflow, answer in a negative number.

  Average monthly sales and average monthly on order

If the Open to buy for each month is : February: $30,400.00 March: $31,250.00 April: $127,800.00 May: $162,000.00 June: $377,550.00 July: $127,500.00. Using the figures provided you will calculate the following for the XYZ store. Average monthly sale..

  Yield to maturity and future price

A bond has a $1,000 par value, 7 years to maturity, and a 9% annual coupon and sells for $1,095. What is its yield to maturity (YTM)?

  Cash discount for early payment of an invoice

The chief drawback of not taking a cash discount for early payment of an invoice is -

  What are the costs and benefits

Are there any good reasons to have Federal Reserve banks scattered around the country rather than having everything run by the Board of Governors in Washington, D.C.? What are the costs and benefits?

Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd