Answer the next 4 questions using the information in the following table. You are considering the purchase of a $1,000 par value Treasury Bill and observe the following quotes for T-Bills in the market: Ignore transaction costs. Time to Maturity (days) Bid Asked % 60 1.64 1.55 88 1.63 1.54 116 1.62 1.53 144 1.61 1.52 4. The bid price of a T-bill in the secondary market is A. the price at which the dealer in T-bills is willing to sell the bill. B. the price at which the investor in T-bills is willing to sell the bill. C. larger than the ask price of the T-bill. D. The price at which the investor can buy the T-bill. 5. What is the purchase price of the 144-day bill that you face? co02 2O

Answer the next 4 questions using the information in the following table. You are considering the purchase of a $1,000 par value Treasury Bill and observe the following quotes for T-Bills in the market: Ignore transaction costs. Time to Maturity (days) Bid Asked % 60 1.64 1.55 88 1.63 1.54 116 1.62 1.53 144 1.61 1.52 4. The bid price of a T-bill in the secondary market is A. the price at which the dealer in T-bills is willing to sell the bill. B. the price at which the investor in T-bills is willing to sell the bill. C. larger than the ask price of the T-bill. D. The price at which the investor can buy the T-bill. 5. What is the purchase price of the 144-day bill that you face? co02 2O

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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Short Question (SQ2) The market index model can be formulated as: Rea+B Rt + Et, (15%) where R denote the annual excess returns of the risky asset and, RM,t is the excess annual return on the market index, S&P 500. There are two risky funds, A and B, and their returns follow the above market index model. The estimations of annual means, annual standard deviations, and the parameters of the index model for Funds A and B and the S&P 500 index are in the table below. Assets Fund A Fund B S&P 500 (M) Risk premium 13% 7% 10% Standard deviation of Market beta (B) returns 40% 20% 20% 1.0 0.5 1.0 An investor wants to invest $10 thousands into funds A and B, and he plans to allocate 70% of his capital into A and the remaining into B. (A) What would be the alpha, beta, and R-squared for his portfolio (the combination of Funds A and B) under the market index model? (6%) (B) If this investor would like to short sell a hedging portfolio, constructed with S&P 500 index portfolio and the risk-free…
You buy a put and a call on a stock that expire at time T. They are European options. Both the put and the call have an exercise price of $50. Plot the cash flows at the time of expiry. This strategy has a name. What is it?
Kindly solved all 3 parts
A trader needs to estimate the CVA on a swap. The exposure management group comes up with EPE of $6 million. With the collateral, the recovery rate of the firm is 60%. The discount factor is 0.9. The probability of default (PD) of the counterparty is 2%. The management group funds that the collateral's PD is positively associated with the PD of the counterparty. EE considering this association is $7 million. What is risk the association referring to and what is the CVA considering this risk? A. Wong-way Risk; 0.0504 m B. Right-way Risk; 0.0504 m C. Wrong-way Risk; 0.0432 m D. Right-way Risk; 0.0432 m
2. Denote by Cn and P calls and puts with strike price K 240 and exercise date N = 1. Let the bank account be Bn = e", with r = 0.05 and let the underlying cost So = 250. Assume that Co 75 and Po = 70. Check whether NA holds. If NA does not hold, propose an %3D arbitrage strategy.
A trader creates a long butterfly spread from call options with strike prices $60, $65, and $70 by trading a total of 400 options. The call options are worth $11, $14, and $18. What is the maximum net loss (after the cost of the options is taken into account)? Select one alternative: O $300 O $100 O $400 O $200
You are pricing options with the following characteristics: •Current stock price (St): $35.60 •Exercise price (X): $50 •Time to expiration (T-t): 9 months •Risk-free rate (rf): 3.25% •Volatility (0): 45% (a): What is the Black-Scholes value of call option? In your hand-written solution, provide the calculations of d1,d2, and the final call price. Use Excel or another spreadsheet program to compute the values of N(d1) and N(d2). See the notes for details. (b): Using put-call parity, what is the value of a put option? For this case, assume continuous compounding, which implies that PVt(X)=e-r(T-t).X.
Please, answer me this question. Thanks you in advance
A trader buys a European call for $1. The strike price is $30. Draw a diagram that shows the trader’s variation in profit as a function of the stock price at expiration.
21. If Fincorp stock trades in a dealer market with bid price of 55.25 and asked price of 55.50, a) Suppose you have submitted an order to your broker to buy at market. At what price will your trade be executed? b) Suppose you have submitted an order to sell at market. At what price will your trade be executed? c) Suppose you have submitted a limit order to sell at $55.62. What will happen? d) Suppose you have submitted a limit order to buy at $55.37. What will happen?
The following limit orders for the XYZ stock have been submitted to the opening auction at the LSE: XYZ Limit Order Book Price Buys 21 20.875 20.75 20.625 20.50 20.375 20.25 20.125 20 10 15 20 10 5 10 What is the market clearing price? O A. some other price OB. 20.50 OC. 20.25 OD. 20.375 OE. 20.125 Sells 20 5 5 5 10 20 30
Options2. Construct profit diagrams at expiration time to show what position in META puts, calls and/or underlying stock best expresses the investor’s objectives described below. META currently sells for $210 so that profit diagrams between $150 and $250 in $10 increments are appropriate. Assume that at-the-money puts and calls currently cost$30 each. The call with strike $190 costs $40 and the call with strike $230 costs $20. (a) An investor wants to benefit from META price drops but does not want to lose more than $30 on the investment. (b) An investor wants to have a positive payoff if the upcoming META earnings announcement is close to market expectations—meaning that the price will not move by more than $20 dollars.

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