Assume that you have invested $100,000 in Japanese equities. When purchased the stock's price and the exchange rate were V100 and V100/$1.00respectively. At selling time, one year after purchase, they were Y110 and V110/51.00. If the investor had sold V10,000,000 forward at the forwardexchange rate of V105/$1.00 the dollar rate of return would be:ⒸA. 28.00%●B.-9.09%OC 4.32%OD 27.27%

The relative worth of two currencies, or the amount of one currency that may be exchanged for one…

Assume that you have invested $100,000 in Japanese equities. When purchased the stock's price and the exchange rate were 100 and $100/$1.00 respectively. At selling time, one year after purchase, they were V110 and V110/51.00. If the investor had sold V10,000,000 forward at the forward exchange rate of V105/$1.00 the dollar rate of return would be: A. 28.00% 8.-9.09% OC 4.32% OD.-27.27 %

Assume that you have invested $100,000 in Japanese equities. When purchased the stock's price and the exchange rate were 100 and $100/$1.00 respectively. At selling time, one year after purchase, they were V110 and V110/51.00. If the investor had sold V10,000,000 forward at the forward exchange rate of V105/$1.00 the dollar rate of return would be: A. 28.00% 8.-9.09% OC 4.32% OD.-27.27 %

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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A Swiss stock has a monthly risk of 0.01 and the CHF/$ exchange rate has a monthly risk of 0.1. The correlation of these two risks is 0.22. What is the annual risk of a US investment into this stock to three decimal places in decimal terms (eg. 5.1% = .051)
Q5. Consider a six-month European put option on a non- dividend-paying stock. The current stock price is $100 and the strike price is $105. The risk-free rate is 10% per annum with semiannual compounding. A lower bound for the price of the European put option is $ _ If the put option were an American put option, a lower bound would be $_ Q6. The price of a European call that expires in six months and has a strike price of $50 is $2. The current underlying stock price is $50, and a dividend of $2 is expected in three months from now. The risk-free interest rate is 10% per annum with quarterly compounding. For the same stock, what is the price of a European put option with the same maturity and strike price? $ Q7. Suppose that c1, c2, and c3 are the prices of European call options on a particular stock with strike prices K1, K2, and K3, respectively, and that p1, p2, and p3 are the prices of European put options on the same stock with strike prices K1, K2, and K3, respectively, where K…
6. A 4-month European call option on a dividend paying stock is selling for C = $4. So = $54, K = $50. A dividend of $0.90 is expected in 2 months. r = .12. Assume continuous discounting. Are there opportunities for arbitrage? Explain and show these opportunities.
Three months ago an investor purchased a six-month US Treasury bond forward contract with a notional value of $10,000,000 at a price of 150. Assume the current forward price for a contract with three months to maturity is 152, and the risk-free rate is 1.0%. The value of the forward position is: $199,503 $100,000 $200,000 Question 10 Assume an asset sells in the spot market for a price of $30. The risk-free rate is 3%, and the forward contract on the asset expires in six months. If the asset pays a dividend of $0.75 and storage costs are $0.50 a year, what is the correct forward price? $31.25 $30.25 $30.19
A European call on OPSY stock with a strike price of $22.50 is worth $1.75. Let the present value of the strike price be $22.25. A European put on the stock with identical terms is worth the same. If the price of OPSY stock is $22, the arbitrage profit that you can create today by trading the stock and other related securities is: (Answer in dollars without $)
uppose a U.S. investor wishes to invest in a British firm currently selling for £33 per share. The investor has $66,000 to invest, and the current exchange rate is $2/£. Required:a. How many shares can the investor purchase? (Round your answer to the nearest whole number.) b. Fill in the table below for dollar-denominated rates of return after one year in each of the nine scenarios (three possible share prices denominated in pounds times three possible exchange rates). (Round your percentage answers to 2 decimal places. Negative amounts should be indicated by a minus sign.)
You purchased a put option on British pounds for RM0.06 per unit. The strike price was RM5.60 and the spot rate at the time the pound option was exercised was RM5.68. Assume there are 47,580 units in a British pound option. What was your net profit on the option？
A one-month European call option on a non-dividend-paying stock is currently selling for $1. The stock price is $47, the strike price is $50, and the risk-free rate is 6% per annum (continuously compounded). What is the time value of a one-month European put on the same stock with the same strike price? A. $3.00 B. $3.75 C. $0.75 D. $0.00
A UK investor buys $1 million of UK stocks in a portfolio with beta 1.2 with respect to the UK market index, and $2 million of US stocks in a portfolio with beta 0.8 w.r.t. with respect to the US market index. Suppose the FTSE 100, S&P 500 and £/$ volatilities are 15%, 10% and 35% respectively, and their correlations are: %UK−US = 0.7, %UK−£/$= 0.4 and %US−£/$= 0.5. Calculate the VaR due to each market risk factor and then aggregate this into (a) the equity VaR and (b) the total systematic VaR. For each VaR figure apply the normal linear model and use 99% confidence (i.e. α = 1%) and h = 10 days for the risk horizon. Express all your answers in $.
Suppose you buy one SPX call option contract with a strike of 2200. At maturity, the S&P 500 index is at 2218. What is your net gain or loss if the premium you paid was $14? (Input the amount as a positive value.)
The share price of your favourite company is currently traded at a price of £80 and interest is compounded continuously at rate 3.7% per year. Assume that the share evolves according to a discrete time LogNormal process with time measured in years, 0.15 and volatility o = 0.24 drift µ . You decide to buy a European call option with a strike price of £84 and an expiration date of two years from now. What is the no-arbitrage price for this option? State your answer to the nearest pence. Do not enter the pound sign. =
Am. 103.

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