Use the following information for questions 34 through 39. A$100 million portfolio consists of 35 million of stock 'with a betaof 1 and 65 million of bonds at a modified duration of 8. As aportfolio manager, you'd like to change the allocation to 50million of stock and 50 million of bonds. In addition, you'd liketo adjust the beta to 1.2 and the modified duration to 7.25. Astock index futures contract has a price of $225,000 and wecan assume the beta is 1. A bond futures contract is priced at$92,000 with an implied modified duration of 5.9. If you want tosynthetically sell 15 million of bonds, how many futurescontracts should you transact?Select one:O a. Buy 173 contractsO b. Sell 123 contractsc.Sell 173 contractsO d. Buy 123 contracts

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Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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You have a used CD store. At an estate sale, you can purchase 260 compact discs for $400. You believe you could sell the CDs for an average of $2.50 each. What is the net benefit of buying the CDs at the estate sale and selling them in your store? A. $400 B. $250 C. $650 D. $1050 E. $900
Lucy is working with a lender to obtain a home loan. The lender gives Lucy a quote of 4.5% with a monthly payment of $1,256. Lucy would like to decrease the monthly payment. How can Lucy go about reducing her monthly home loan. payment? O Lucy can purchase discount points upfront to reduce the interest rate on the loan. O Lucy can negotiate for a higher interest rate. O Lucy can purchase discount points upfront to increase the interest rate on the loan. O Lucy can pay a loan origination fee after the loan closes.
Money taken out of a sole proprietorship by an owner is: Choose the correct answer 1. subject to income tax, Employment Insurance and Canada Pension Plan 2. deductions when taken out. 3. considered an expense 4. taken as a draw against anticipated profits 5. all of the above
If all the individual land parcels in a new housing development are sold for $300,000 each, the developer projects total revenue from land sales will be $120 million. If the land lender requires that their $60 million land loan be completely paid off by the time that 75% of the individual land parcels have been sold, what would be the lender’s minimum release price for each parcel? a. $150,000 b. $200,000 c. $250,000 d.$300,000
John Johnson, one of your classmates, is preepairing to launch an e-commerce company to sell home repair guidebooks, tools and other related material for home repairs. He has just told you that he talked to his grandmother over the weekend and she has greed to lendd her 25000 thousand euros to launch the company. When you askedJohn what arrangements he has made with his grandmother to formalize the loan, he looked puzzled and said "She plans to send me a check in a week or so, she just needs to get them out of her savings account". Do you agree/disagree with John's actions? What would you advise him to do?
Benefits and Costs of Buying vs. Renting Reem & Kareem are trying to decide whether to rent or purchase housing. Reem favors buying and Kareem leans toward renting, and both seem able to justify their particular choice. Reem thinks that the tax advantages are a very good reason for buying. Kareem, however, believes that cash flow is so much better when renting. See whether you can help them make their decision. Does the home buyer enjoy tax advantages? Explain. Discuss Kareem’s belief that cash flow is better with renting. Suggest some reasons why Reem might consider renting rather than purchasing housing. Suggest some reasons why Kareem might consider buying rather than renting housing. Is there a clear-cut basis for deciding whether to rent or buy housing? Explain why or why not.
In the prospectus for the Brazos Aggressive Growth fund, the fee table indicates that the fund has a 12b-1 fee of 0.35 percent and an expense ratio of 1.55 percent that is collected once a year on December 1. Joan and Don Norwood have shares valued at $114,500 on December 1. What is the amount of the 12b-1 fee this year? What is the amount they will pay for expenses this year?
Taylor, 21, works as an assistant/receptionist at a local pet groomer, earning $15,080 per year (full-time, minimum wage work) with no benefits or paid leave. They find working with the groomers, pets, and customers interesting and fun since they plan to pursue work at the county animal shelter in the future. Working with animals has been Taylor's goal for most of their life. Taylor lives with their parents, paying rent, cooking most of the family's meals, and helping out around the house. They also provide occasional childcare for their much-younger siblings in exchange for using one of the family cars to get to work when the weather is poor. On Saturdays, Taylor volunteers with a local animal rescue. They'd like to foster pets for the rescue, but Taylor's siblings are allergic to cats and and their parents hate dogs. Taylor doesn't have a lot of spare time to socialize with their friends but always makes time for a weekly group movie night at someone else's house (Taylor's parents…
Which of the following statements is correct for the Black-Scholes model? A) The price of an American call written on a stock is: c = SN(d1)-Ke-rTN(d2) B) The stock price at a future point in time follows a log-normal distribution. C) The continuously compounded return on the stock follows a log-normal distribution. D) Black-Scholes prices may allow for arbitrage opportunities. Please explain and justify your choice.
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You are planning to rent a car for a one-week vacation. You have the option of buying an insurance that costs $80 dollars for a week. If you do not purchase insurance, you would be personally liable for any damages. You anticipate that a minor collision will cost $2,000, whereas a major accident might cost $16,000 in repairs. Develop a payoff table for this situation. What decision should you make using each strategy? Aggressive (Optimistic) Conservative (Pessimistic) Opportunity Loss You have recently read in a magazine that that the probability of a major accident is 0.05% and that the probability of a minor collision is 0.18%. Construct a decision tree and identify the best expected value decision.

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