Give typing answer with explanation and conclusion In futures markets a hedger: a. can be a funds manager and tries to realise risk-free returns taking advantage of price differentials between different markets b. Usually represents hedge funds and trying to implement sophisticated strategies to earn abnormal returns c. can buy and sell futures contracts multiple times during the day adding depth and liquidity to the markets d. can represent a superannuation fund and buys VIX futures anticipating high volatility in coming months

Consider a capital market with two securities. The payoffs of these securities in the two equally likely states of the world are given in the table below. Рayolf Price Security State 1 State 2 PA=2 A 4 2 PB-3 B a. Discuss the concepts of complete capital markets, pure (Arrow-Debreu) securities, and pure factor portfolios. Establish whether the capital market in this case is complete and determine the prices of the pure socurities by arbitrage.

An arrangement with a broker to borrow stocks from them and then sell it in the market, with the hope that they earn a profit by buying the stock back again after it has fallen in price is called Select one: a. smart money. Ob. short sales. Oc. behavioral finance. Od. random walk.

A risk manager uses a futures contract, which has a correlation of 0.88 with the spot asset, to hedge her exposure. She calculates a hedge ratio of 0.9429. What part of the cash flow remains unhedged? None of these O 5.71% O 77.44% 22.56%

Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rƒ. The characteristics of two of the stocks are as follows: Correlation = -1 Stock A B Rate of return Required: a. Calculate the expected rate of return on this risk-free portfolio? (Hint: Can a particular stock portfolio be formed to create a "synthetic" risk-free asset?) (Round your answer to 2 decimal places.) Yes No X Answer is not complete. Expected Return 9% 13% % Standard Deviation 45% 55% b. Could the equilibrium rƒ be greater than rate of return?

Suppose you observe the following situation on two securities:Security           Beta   Expected Return Pete Corp.       0.8      0.12 Repete Corp.   1.1      0.16 Assume these two securities are correctly priced. Based on the CAPM, what is the return on the market?

You have been provided the following data about the securities of three firms, the market portfolio, and the risk-free asset: a. Fill in the missing values in the table. (Leave no cells blank - be certain to enter 0 wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Security Firm A Firm B Firm C The market portfolio The risk-free asset Expected return Expected Return * With the market portfolio Sell Buy 0.118 0.132 0.113 0.12 0.05 % Expected return Standard Deviation b-1. What is the expected return of Firm A? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) 0.23 0.74 0.74 0.23 0 % Correlation* 1.02 0.42 0.27 1 0 b-2. What is your investment recommendation regarding Firm A for someone with a well-diversified portfolio? b-3. What is the expected return of Firm B? (Do not round intermediate calculations and enter your answer as a percent rounded to 2…

You have been provided the following data about the securities of three firms, the market portfolio, and the risk-free asset a. Fill in the missing values in the table. (Leave no cells blank be certain to enter O wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Security Fimm A Fim B Fim C The market portfolio The risk-fres asset Expected retum O Buy O Sell Expected retum Expected Return 0.119 0.131 O Buy ⒸSell 0.112 0.12 0.05 With the market portfolio b-1. What is the expected return of Firm A? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.. 32.16.) Expected retum Standard Deviation 0.22 b-2. What is your investment recommendation regarding Firm A for someone with a well- diversified portfolio? O Sell O Buy 0.75 0.19 Correlation b-3. What is the expected return of Firm B? (Do not round intermediate calculations and enter your answer as a percent rounded to 2…

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In a CAPM world, what do you need to know in order to estimate an asset's expected return? Group of answer choices The risk free rate, the market risk premium, and the asset's standard deviation The risk free rate, the market risk premium, and the asset's beta The corporate bond rate, the expected return on the S&P 500 and the asset's Beta Market sentiment, historical stock returns and the risk free rate