Ans 1: Option A Ans 2: New Required return for HR = 7% + 2*(11% -7%) = 15% New Required return for LR = 7% + .5*(11% - 7%) = 9% So difference is 6% Option E Ans 3: No of stocks = 20 Weight of each stock = 1/20 Beta of portfolio = 1.2 Beta of stock sold = 0.7 Beta of stock bought = 1.4 Hence new portfolio beta = 1.2 -.7/20 + 1.4/20 = 1.2 + .7/20 = 1.235 Option B Ans 4: New Beta = 0.7*1.5 = 1.05 Old required rate of return = 15% So old risk free rate = 15% -5%*.7 =11.5% New Required
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reaction from everybody else especially if I were to put it up in a school * Email/Letter: saying the same thing but different ways to get it to the people I need it to. * Word of mouth: Ask people to tell others about it * Poster in local shops * Ask to put an advert in the local newspaper * Ask the local radio to mention it * Ask blogs/websites to include it in one of their posts * Put an event on Facebook * Put inserts in the local paper * Tweet about it (on
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What is a drug? A drug is a chemical substance that‚ when absorbed into the body‚ can alter normal bodily function. Many drugs have been banned in sport if they are deemed to provide an unfair advantage‚ pose a health risk‚ or are seen to violate the ‘spirit of sport’. The use of banned drugs by athletes is referred to as ‘doping’. The International Olympic Committee (IOC)‚ and more recently‚ the World Anti-Doping Agency (WADA) have been leading the way in the battle against drugs in sport.
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The Society for Financial Studies The Information in Option Volume for Future Stock Prices Author(s): Jun Pan and Allen M. Poteshman Source: The Review of Financial Studies‚ Vol. 19‚ No. 3 (Autumn‚ 2006)‚ pp. 871-908 Published by: Oxford University Press. Sponsor: The Society for Financial Studies. Stable URL: http://www.jstor.org/stable/3844016 . Accessed: 09/04/2013 01:56 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use‚ available at . http://www
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forward contract and the options contract. Answer: There is no up-front cost of hedging by forward contracts. In the case of options hedging‚ however‚ hedgers should pay the premiums for the contracts up-front. The cost of forward hedging‚ however‚ may be realized ex post when the hedger regrets his/her hedging decision. 4. What are the advantages of a currency options contract as a hedging tool compared with the forward contract? Answer: The main advantage of using options contracts for hedging
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Problem 20-6 on Call Options based on Chapter 20 (Excel file included) You own a call option on Intuit stock with a strike price of $40. The option will expire in exactly 3 months’ time. a. If the stock is trading at $55 in 3 months‚ what will be the payoff of the call? • Payoff-max=(50-s) = max (55-40)=15 the Ford owner will gain $15 b. If the stock is trading at $35 in 3 months‚ what will be the payoff of the call? • Payoff-max=(35-s) = max (35-40)=-5 the owners will gain $-5 c. Draw
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Project Report on Derivatives | Introduction to Futures & Options | Faculty: Dr. Sharif N. Ahkam 1.0INTRODUCTION In recent times the Derivative markets have gained importance in terms of their vital role in the economy. The purpose of this report to get an orientation to the derivatives and develop a basic understanding of what it is and how does it work. Derivatives are financial instruments‚ which derive their value from an underlying asset. The underlying
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disappear when spread across many investors? (Points : 1) Diversifiable Catastrophic Predictive Nondiversifiable | 5. Who from the following list would be considered a speculator by entering into a futures or options contract on commodities?(Points : 1) Corn delivery truck driver Food manufacturer Farmer None of the above | 6. Assume that you purchase 100 shares of Jiffy‚ Inc. common stock at the bid-ask prices of $32.00
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Lynch’s choice of the conversion premium and coupon rate to propose to MoGen management. This pricing decision requires students understand the concept of valuing a convertible as the sum of a straight bond plus the conversion option. Valuing the conversion option as a call option requires the estimation of the Black-Scholes model‚ with the volatility being a particularly challenging input. On a strategic level‚ the case introduces students to the concept of matching a company’s business risk
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Question : (TCO C) Pate & Co. has a capital budget of $3‚000‚000. The company wants to maintain a target capital structure that is 15 percent debt and 85 percent equity. The company forecasts that its net income this year will be $3‚500‚000. If the company follows a residual dividend policy‚ what will be its total dividend payment? (a) $205‚000 (b) $500‚000 (c) $950‚000 (d) $2‚550‚000 (e) $3‚050‚000 Instructor Explanation: Answer is: c Text: pp. 570-572 - Residual Dividends‚ Chapter 14 The amount
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