1.Portfolio = $1,000,000, 90% in equity earning 12%, 40% in Fixed Income = $125,000 earning 2.5% [...
Question:
1.Portfolio = $1,000,000, 90% in equity earning 12%, 40% in Fixed Income = $125,000 earning 2.5% [ note 90% + 40% > 100%, there is a margin here, assume the cost of margin is 6.5%].Calculate the FV in 5 years.
2.A bond YTM is 5%, coupon is 9%, term is 10 years semiannual. Calculate the effective duration. Assume the yield rises by 60 bps, provide the duration-based change in bond price and actual calculator-based price. Calculate and explain the error.
3. An investor has an equity of $250,000 in SPY (S & P 500 ETF).He doubles the investment using the broker's margin assuming a 0.5 initial margin.If the maintenance margin is 0.35, determine:
a. The SPY current price
b. Price at which there will be a margin call (MC)
c. % decline in which there will be a MC
d. Required action if there is a MC
e. If SPY had increased by 14% in one year, calculate the ROI.
4. If you were bearish, and shorted $100,000 of SPY:
a. Provide the margin requirement
b. If the stock declines 5%, provide the ROI.
c. Explain when to use the bid and ask quotes.
5. Go to www.optionseducation.org, Options quotes, find the (estimated 30 day) positions on QQQ (Nasdaq). Find/ determine:
a. The bid/ ask quotes for the approximate 0.1800 delta position
b. Determine the correct margin requirement for the short put.[Note there are three formulas to choose from.Select the highest.]
6. You wish to "go long" with ES futures contracts with $100,000.
a. How many contracts can you have?
b. At what point will you get a margin call?
c. What must you do if you get a MC?
7. You have a $500,000 account 60% in equity and 40% in fixed income and wish to short options.
a. What is your estimated Non-Margin Buying Power?
b. What might raise or lower the NMBP?
8. Provide multiple interpretations of a Beta () of > 2.00.
9. TQQQ (leveraged ETF for Nasdaq).
a. What is the price?
b. How many shares can you buy with $100,000?
c. How many shares can you buy with margin?
d. If not margined and the NASDAQ increases 20%, what will your account be worth?
Contemporary Financial Management
ISBN: 978-1285198842
13th edition
Authors: R. Charles Moyer, James R. McGuigan, Ramesh P. Rao