Questions from General Investment

Q: Suppose the 1-year futures price on a stock-index

Suppose the 1-year futures price on a stock-index portfolio is 1,914, the stock index currently is 1,900, the 1-year risk-free interest rate is 3%, and the year-end dividend that will be paid on a $1,...

Q: Consider these futures market data for the June delivery S&P

Consider these futures market data for the June delivery S&P 500 contract, exactly one year from today. The S&P 500 index is at 2,145, and the June maturity contract is at F0 = 2,146. a. If the curren...

Q: Both gold-mining firms and oil-producing firms might choose

Both gold-mining firms and oil-producing firms might choose to use futures to hedge uncertainty in future revenues due to price fluctuations. But trading activity sharply tails off for maturities beyo...

Q: You believe that the spread between municipal bond yields and U.

You believe that the spread between municipal bond yields and U.S. Treasury bond yields is going to narrow in the coming month. How can you profit from such a change using the municipal bond and T-bon...

Q: Consider the futures contract written on the S&P 500 index

Consider the futures contract written on the S&P 500 index and maturing in one year. The interest rate is 3%, and the future value of dividends expected to be paid over the next year is $35. The curre...

Q: The risk-free rate of return is 8%, the expected

The risk-free rate of return is 8%, the expected rate of return on the market portfolio is 15%, and the stock of Xyrong Corporation has a beta coefficient of 1.2. Xyrong pays out 40% of its earnings i...

Q: Suppose that the value of the S&P 500 stock index

Suppose that the value of the S&P 500 stock index is 2,000. a. If each E-mini futures contract (with a contract multiplier of $50) costs $25 to trade with a discount broker, how much is the transactio...

Q: You manage a $23 million portfolio, currently all invested in

You manage a $23 million portfolio, currently all invested in equities, and believe that the market is on the verge of a big but short-lived downturn. You would move your portfolio temporarily into T-...

Q: A household savings-account spreadsheet shows the following entries:

A household savings-account spreadsheet shows the following entries: Use the Excel function XIRR to calculate the dollar-weighted average return between the first and final dates.

Q: Evaluate the market timing and security selection abilities of four managers whose

Evaluate the market timing and security selection abilities of four managers whose performances are plotted in the accompanying diagrams.