An Exchange Traded Fund (ETF) is a security that represents a portfolio of individual stocks. Consider an ETF for which each share represents a portfolio of 2 shares of Hewlett-Packard (HPQ), 2 shares of Sears (SHLD), and 4 shares of General Electric (GE). Suppose the current stock prices of each individual stock are as shown here: Stock HPQ SHLD GE Current Market Price $25 $44 $11 a. What is the price per share of the ETF in a normal market? b. If the ETF currently trades for $164, what arbitrage opportunity is available? What trades would you make? (Ignore any transaction costs.) c. If the EFT currently trades for $194, what arbitrage opportunity is available? What trades would you make? (lanore any transaction costs) *** a. What is the price per share of the ETF in a normal market?

An Exchange Traded Fund (ETF) is a security that represents a portfolio of individual stocks. Consider an ETF for which each share represents a portfolio of 2 shares of Hewlett-Packard (HPQ), 2 shares of Sears (SHLD), and 4 shares of General Electric (GE). Suppose the current stock prices of each individual stock are as shown here: Stock HPQ SHLD GE Current Market Price $25 $44 $11 a. What is the price per share of the ETF in a normal market? b. If the ETF currently trades for $164, what arbitrage opportunity is available? What trades would you make? (Ignore any transaction costs.) c. If the EFT currently trades for $194, what arbitrage opportunity is available? What trades would you make? (lanore any transaction costs) *** a. What is the price per share of the ETF in a normal market?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Calculate the net asset value (NAV) for a mutual fund with the following values: The NAV of the mutual fund is $ Data table per share. (Round to the nearest cent.) (Click on the following icon in order to copy its contents into a spreadsheet.) Market value of securities held in the portfolio = $4.3 billion Liabilities of the fund = $168 million = 318 million Shares outstanding X
Consider a market value-weighted index consisting of 3 stocks: A, B, and C. The stocks' prices at time 0 (p0) and time 1 (p1) are given below, along with the number of shares outstanding. Calculate the index levels at time 0. Round your answer to 4 decimal places. For example, if your answer is 3.205%, then please write down 0.0321. stock p0 p1 outstanding shares 43 45 200 69 50 500 11 12 600 A B C
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Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market Return 68 20 Aggressive Stock 2.0% 32 Defensive Stock 5.0% 15 a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) Beta A Beta D b. What is the expected rate of return on each stock if the market return is equally likely to be 6% or 20% ? (Round your answers to 2 decimal places.) Rate of return on A Rate of return on D
Currently, you own a portfolio comprised of the following three securities. How much of the riskiest security should you sell and replace with risk-free securities if you want your portfolio beta to equal 90 percent of the market beta? Stock Value $13,640 15,980 23,260 E F Multiple Choice O $7,023.15 $7,811.29 O $8,666.67 O $7,753.51 Beta 1.13 1.48 .86 $8,318.50
An Exchange Traded Fund (ETF) is a security that represents a portfolio of individual stocks. ETFS can be purchased on the stock exchanges like individual stocks. Assume that you can exchange the ETF for the underlying stocks and that you can form an ETF unit using the underlying stocks. In addition, assume that you can purchase and short-sell stocks and ETFS without any limitations. The Lonestar ETF consists of 5 shares of Exxon Mobil (XOM), 8 shares of AT&T (T), and 1 share of Texas Instruments (TXI). The current bid and ask prices of the three stocks and the Lonestar ETF are listed below: Security Bid Price Ask Price Еxxon Mobil (XоМ) $36.05 $36.08 AT&T (T) $28.87 $28.90 Texas Instruments (TXN) $156.75 $156.80 Lonestar ETF $569.60 $569.70 Are there any arbitrage opportunities? If yes, summarize the exact transactions that you suggest to perform the arbitrage. If not, explain why there are no arbitrage opportunities.
Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Common Stock A Common Stock B Probability Return Probability Return 0.35 13% 0.25 −7% 0.30 17% 0.25 8% 0.35 21% 0.25 15% 0.25 23% (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. Given the information in the table, the expected rate of return for stock A is enter your response here%. (Round to two decimal places.)
You want to construct a portfolio containing equal amounts of U.S. Treasury bills, stock A, and stock B. If the beta of the stock A is 1.42 and the beta of the portfolio is 1.07, what does the beta of stock B have to be?
You are given the following information concerning several mutual funds: Fund Return in Excess of the Treasury Bill Rate Beta A 12.4% 1.14 B 13.2% 1.22 C 11.4% 0.90 D 9.8% 0.76 E 12.6% 0.95 During the time period, the Standard & Poor's stock index exceeded the Treasury bill rate by 10.5 percent (i.e., r(m) - r(f) = 10.5%) a. Rank the performance of each fund without adjusting for risk and adjusting for risk using the Treynor index. Which, if any, outperformed the market? (Remember, the beta of the market is 1.0.) b. The analysis in part (a) assumes each fund is sufficiently diversified so that the appropriate measure of risk is the beta coefficient. Suppose,…
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Suppose that a hedge fund enters a market order to immediately sell 1600 shares. Compute the execution price for this trade. Top of the limit order book Price Shares 3400 103.12 2000 102.92 1600 102.71 500 102.50 Asks 100 102.30 Bids 200 102.10 700 101.89 1600 101.69 2100 101.48 3200 101.28 A. The exection price for immediately selling 1600 shares is $102.71 per share. B. The exection price for immediately selling 1600 shares is $101.83 per share. OC.The exection price for immediately selling 1600 shares is $102.10 per share. D. The exection price for immediately selling 1600 shares is $102.50 per share. O E. The exection price for immediately selling 1600 shares is $101.69 per share. O F. The exection price for immediately selling 1600 shares is $101.89 per share. G. The exection price for immediately selling 1600 shares is $102.30 per share.
Data: S0 = 102; X = 115; 1 + r = 1.1. The two possibilities for ST are 146 and 84. Required: The range of S is 62 while that of P is 31 across the two states. What is the hedge ratio of the put? Form a portfolio of one share of stock and two puts. What is the (nonrandom) payoff to this portfolio? What is the present value of the portfolio? Given that the stock currently is selling at 102, calculate the put value.

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