Final FIN 35 1. Using for deliver nug the pizza example, let us asume you purcha

Question

Final FIN 35 1. Using for deliver nug the pizza example, let us asume you purchase 5 small cheese pizzas for S40 ery in I hour. After 30 minutes you sell a contract to sell 5 small cheese pizas for 342. How did you end your futures contraer? A. Delivery B. Cash Cofetting positions 12. A portfolio manager has a $109 million portfolio that tracks the S&P; 500, Currently the Sep 500 is trading at $1,011. How will the manager hedge the ponfolio using index futures? R Sell 431 futures contracts B. Buy 431 futures contracts C.Sell 1078 futures contracts D. Buy 1078 futures contracts VA 13. Lauren has a margin account and deposits $46,255. Assume the margin requirement is 42.00% and Gentry Shoe Co. is selling at S12. What is the value of Lauren's equity if the stock price falls to$30? 49, 27.20- A. $19,427 B. $41,271 C, $40,205 D. $39,372 14. Rock Solid has a stock portfolio worth $100 million, which tracks closely with the S&cP; 500. The portfolio manager fears that a decline is coming therefore buys put options to protect the entire portfolio when the S&P; 500 was $1,005. The strike price the entered into was at $1,005. Suppose after a year the Sep 500 is $955 and the portfolio is worth $91 million. The options premium is $1 million. What is the value of the total position? A.$90,000,000 B. $91,990,050 C. $95,975,124 D. $94,975,124 15. The expected dividend is $2 for Stock A. The growth rate is 5%. The required rate of return is,11%. Based on the Dividend Discount Model what is the estimated price of Stock A? A. $32.33 B. $33.33 C $36.00 S35.00

Explanation / Answer

11) It is option B
12)he has to buy index futures
=(109*10^6)/(1011*1000)
=1078
It is option D
13)if it falls to 10
no of share sit can buy=46255/42%=3441 shares
The price falls from 32 t0 30 so loss is =3441*(32-30)=6882
Value of equity=46255-6882=39372
option D

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