You are a corporate treasurer of an Australian-based gold producer. You believe that the price of gold is going to rise and you would like to benefit from any increase in price, but would also like to hedge against a lower gold price should the market fall. Which one of the following hedge instruments would achieve this result? O a. Sell gold forward O b. Sell a gold put option O . Sell gold futures O d. Sell a gold call option

You are a corporate treasurer of an Australian-based gold producer. You believe that the price of gold is going to rise and you would like to benefit from any increase in price, but would also like to hedge against a lower gold price should the market fall. Which one of the following hedge instruments would achieve this result? O a. Sell gold forward O b. Sell a gold put option O . Sell gold futures O d. Sell a gold call option

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) True or False: The difference between the price of oil in California and the price of oil in Texas implies that there is an opportunity to arbitrage. (b) True or False: If the price of corn in market X is higher than market Y, then corn will be transported from market X to Y. (c) True or False: The basis for a cash market at the futures delivery point will decrease to zero at the expiration of its associated futures contract. (d) True or False: The basis for all cash markets will decrease to zero at the expiration of its associated futures contract.
A(n). OOO futures hedge is most likely to result in ongoing payments over the life of the foreign exchange instrument. options money market forward
Adam Smith is a portfolio manager with Point72 Investments, a U.S.-based asset management firm. Smith is considering using options to enhance portfolio returns and control risk. He asks his junior analyst, Tommy Lee, to help him. Lee collected and summarize the relationship between a European call option and various factors that might impact the call option value in Table 1. Which of the relationships shown in Table 1 below is incorrect? (Choose the best answer) Table 1 Impact of Increasing the Variables on put option value Variables Impact on put option value Stock price Decrease Strike Price Decrease Maturity Increase Volatility Increase Interest rate Decrease Dividend Increase Volatility and Stock Price Risk-free rate and Volatility Dividend and stock price Maturity and Strike Price Stock Price and Interest Rate
26. Suppose an investor buy a European call option at price c, K is the strike price and ST is the spot price of the asset at maturity of the contract, when ( ),the investor will exercise the option.
(a) What is the expected shape of a futures curve for cotton (a storable commodity)? What about for live hogs (a non-storable commodity)? (b) Explain why a rational economic agent may still choose to hold stocks even if the expected return on stocks is negative.
You are a portfolio manager for a wealthy individual who is interested in investing in the stock market. The individual is risk-averse and wants to maximize returns while minimizing risk. Which of the following asset classes would be most appropriate for a well-diversified portfolio? Stocks only Bonds only A mix of stocks, bonds, and other asset classes Real estate only
Which of the following defines a hedge fund the most? 1. A collective investment model based on issuing a fixed number of shares which are not redeemable from the fund. 2. A negotiable security that represents securities of a foreign company and allows that company's shares to trade in the U.S. financial markets. 3. A diversified portfolio that typically does not limit the number of shares it can offer, and they are bought and sold on demand. 4. A type of investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio construction and risk-management techniques to improve performance.
In a few sentences, answer the following question as completely as you can. In discussing asset pricing, your textbook suggests that an investor will be indifferent between two bonds with equal yield to maturity, as long as they are of equivalent risk. Can you think of any real-world factors that might make an investor prefer one of these bonds over the other?
Help plz
Question Five: Which of the following is not an assumption that underpins the capital asset pricing model (CAPM)? Investors behave in accordance with Markowitz mean-variance portfolio theory. Investors are rational and risk averse. Investors all invest for the same period of time. Investors have heterogeneous expectations about expected returns and return variances for all assets. There is a risk free rate at which all investors can borrow or lend any amount. Capital markets are perfectly competitive, frictionless and efficient. Question Six: Which of the following expressions best describes the slope of the security market line? The slope of the security market line is equal to the Sharpe ratio. The slope of the security market line is equal to the Treynor ratio. The slope of the security market line is equal to alpha. The slope of the security market line is equal to the market risk premium. The slope of the security market line is equal to the standard deviation of the risky…
A MNC wishes to reduce the exposure to British pound payables, it can _________. I. Purchase pounds forward II. Buy a pound futures contract III. Buy a pound put option IV. Buy a pound call option A. I, II, III B. I, II C. II, III, IV D. I, II, IV

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