The following three defense stocks are to be combined into a stock index in January 2022 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance): Douglas McDonnell Dynamics General International Rockwell Shares (millions) Index value 430 535 210 1/1/22 $ 108 38 67 Price 1/1/23 $ 114 34 56 a. Calculate the initial value of the index if a price-weighting scheme is used. 1/1/24 $ 131 48 70 b. What is the rate of return on this index for the year ending December 31, 2022? For the year ending December 31, 2023? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a

The following three defense stocks are to be combined into a stock index in January 2022 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance): Douglas McDonnell Dynamics General International Rockwell Shares (millions) Index value 430 535 210 1/1/22 $ 108 38 67 Price 1/1/23 $ 114 34 56 a. Calculate the initial value of the index if a price-weighting scheme is used. 1/1/24 $ 131 48 70 b. What is the rate of return on this index for the year ending December 31, 2022? For the year ending December 31, 2023? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a

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 stock analyst at JP Dealers believes that a stock will earn the following returns next period depending on the state of the economy. Given the information below, what is the expected return on the stock? State of Economy Probability Return if State Occurs Depression 30% -10% Normal 50% 11% Boom 20% 18% Enter answer in decimal form, rounded to 4th digit, as in "0.1234"
i.On April 1, an investor holds 40,000 shares of a certain stock. The market price is $28 per share. The investor is interested in completely hedging against movements in the market over the next month and decides to use the June Mini S&P 500 futures contract. The index is currently 4,500 and one contract is for delivery of $50 times the index. If the beta of the stock is 1.2, what strategy should the investor follow to completely hedge their stock portfolio? ii. After a month, the investor wishes to partially unwind their hedge to reach an overall target beta of 1. Using your answer from above, what strategy should the investor follow to reach their target? They still hold 40,000 shares and the market price is now $27.5 per share. The June Mini S&P Futures index is still at 4,500 and one contract for delivery is of $50 times the index. What will be the residual remaining position in their futures contracts?
The following is a collection of analyst forecasts of the eamings per share of WPB Corp, for Q3 2021. Calculate the EPS If the reported EPS for WPB Corp. is $26.0O, how should the stock price react? $23.10 $29.45 $37.15 $14.95 $32.99 F $25.60 $19.85 H. $33.35
Refer to Figure 15.1, which lists the prices of various Microsoft options. Use the data in the figure to calculate the payoff and the profit/loss for investments in each of the following November 2019 expiration options on a single share, assuming that the stock price on the expiration date is $143. (Loss amounts should be indicated by a minus sign. Round "Profit/Loss" to 2 decimal places.)
es The following three defense stocks are to be combined into a stock index in January 2022 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance): Douglas McDonnell Dynamics General International Rockwell Index value Shares (millions) 420 450 250 2022 return 2023 return a. Calculate the initial value of the index if a price-weighting scheme is used. 1/1/22 $ 63 53 82 Price 1/1/23 $ 67 47 71 % % b. What is the rate of return on this index for the year ending December 31, 2022? For the year ending December 31, 2023? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. 1/1/24 $ 84 61 87
Consider 2 stocks in the following table. We create a stock index of companies that make stuff for Spring Break. stocks PO Q0 P1 Q1 ABC, Inc. $850P0 150Q0 $ 830P1 150Q1 XYZ, Inc. $510P0 400Q0 $550P1 400Q1 What is the initial portfolio weight for stock ABC in a Price - weighted index of these two stocks
On July 1, an investor holds 50,000 shares of a certain stock. The market price is $30 per share. The investor is interested in hedging against movements in the market over the next month and decides to use the September Mini S&P 500 futures contract. The index is currently 1,500 and one contract is for delivery of $50 times the index. The beta of the stock is 1.3. What strategy should the investor follow to reduce beta to 0?
The current price of a stock is $18. In 1 year, the price will be either $28 or $15. The annual risk-free rate is 3%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. X Open spreadsheet Find the price of a call option on the stock that has a strike price is of $23 and that expires in 1 year. (Hint: Use daily compounding.) Assume 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent. $
What should be the prices of the following preferred stocks if comparable securities yield 10 percent? Use Appendix B and Appendix D to answer the questions. Round your answers to the nearest cent. MN, Inc., $5 preferred ($110 par) $ CH, Inc., $5 preferred ($110 par) with mandatory retirement after 4 years $ What should be the prices of the following preferred stocks if comparable securities yield 12 percent? Round your answers to the nearest cent. MN, Inc., $5 preferred ($110 par) $ CH, Inc., $5 preferred ($110 par) with mandatory retirement after 4 years $ In which case did the price of the stock change? As with the valuation of bonds, an increase in interest rates causes the value of preferred stock to (fall or rise)? In which case was the price more volatile? While the prices of both preferred stocks (declinedor increased) , the price of the (perpetual or preferred stock ) stock with mandatory retirementItem 7 was more volatile.
(a) Stocks A and market have the following estimated retuns: RA RM year 2018 -18% -24% 2019 44% 24% 2020 -22% -4% 2021 22% 8% 2022 34% 56% Required to (1)Calculate the expected rate of return for stock A and Market during the 5-year period. (ii) Now calculate the total risk of stock A and Market
The following three defense stocks are to be combined into a stock index in January 2019 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance). Suppose that Douglas McDonnell shareholders approve a 2-for-1 stock split on January 1, 2020. Douglas McDonnell Dynamics General International Rockwell New divisor Shares (millions) 180 325 370 Rate of return 1/1/19 $ 60 68 97 Price 1/1/20 $ 64 64 86 a. What is the new divisor for the index? (Do not round intermediate calculations. Round your answer to 3 decimal places.) 1/1/21 $77 78 100 b. Calculate the rate of return on the index for the year ending December 31, 2020, if Douglas McDonnell's share price on January 1, 2021, is $23.42 per share. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Suppose that on 27 October 2022, Wall Street Journal in New York presents the following price for 27 March 2023 call options on Microsoft stock (in $ USA) strike 75 80 85 price 11 7.96 5.5 while the annual interest rate is 4% per year. On this date (27 October 2022) the Microsoft stock was trading at $81.625. Suppose we decide that the volatility of the market is 30%. Should you buy the call option as the European one with strike price $80? Justify your answer.

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