A hedge fund manager has a historical ROA of 7% and a ROE of 23%. The...

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A hedge fund manager has a historical ROA of 7% and a ROE of 23%. The manager believes that a recession will cause the ROA to decline next year to 6%. Assuming an interest rate of 1%, what level of leverage should the manager employ in order to maintain an ROE of 23%? 16. John bought a 6-month Coke put option with a strike price of $55 for a premium of $8.25. If at expiration Coke is selling for $42, what is John's dollar gain or loss if he sell 100 shares? (Each option is for 1 share) 17. What would be the net value of a covered call position be if the stock price at expiration is $38 and the exercise price is $33 and a premium of $1.5? 18. What would be the net value of a protective put position be if the stock price at expiration is $38 and the exercise price is $33 and a premium of $1.5? A hedge fund manager has a historical ROA of 7% and a ROE of 23%. The manager believes that a recession will cause the ROA to decline next year to 6%. Assuming an interest rate of 1%, what level of leverage should the manager employ in order to maintain an ROE of 23%? 16. John bought a 6-month Coke put option with a strike price of $55 for a premium of $8.25. If at expiration Coke is selling for $42, what is John's dollar gain or loss if he sell 100 shares? (Each option is for 1 share) 17. What would be the net value of a covered call position be if the stock price at expiration is $38 and the exercise price is $33 and a premium of $1.5? 18. What would be the net value of a protective put position be if the stock price at expiration is $38 and the exercise price is $33 and a premium of $1.5?

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Lets start with the first question 1 A hedge fund manager has a historical ROA of 7 and a ROE of 23 The manager believes that a recession will cause the ROA to decline next year to 6 Assuming an inter... View the full answer