EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Question
Chapter 4, Problem 1PS
Summary Introduction
To determine:
Which amongst the two fixed income unit investment trust or open end fixed income mutual fund will have less operating expense?
Introduction:
A Unit Investment trust refers to the investment company which provide fixed portfolio that comprises of bonds and stock in the form of redeemable units for a particular time period to its investor. This helps an investor to earn dividend income and capital appreciation. Mutual fund refers to the investment policy under which the funds are pooled from the investor and same is invested in different securities such as debentures, bonds and stocks. Mutual funds are advantageous for the small investor as it provides leverage to make investments in small amounts.
Expert Solution & Answer
Answer to Problem 1PS
Fixed income unit investment trust must have lesser expense associated with operation when compared with open end fixed income mutual fund.
Explanation of Solution
In this situation, once the trust is established the investment trust portfolio is fixed. There is no need to incur any expenses for the
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Suppose that you are a U.S.-based importer of goods from the United Kingdom. You expect the value of the pound to increase against the U.S. dollar over the next 30 days. You will be making payment on a shipment of imported goods in 30 days and want to hedge your currency exposure. The U.S. risk-free rate is 5.5 percent, and the U.K. risk-free rate is 4.5 percent. These rates are expected to remain unchanged over the next month. The current spot rate is $1.90.
1.Move forward 10 days. The spot rate is $1.93. Interest rates are unchanged. Calculate the value of your forward position. Do not round intermediate calculations. Round your answer to 4 decimal places.
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