(a) Jenny short-sold one unit of Stock A today and plan to close her position in...
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(a) Jenny short-sold one unit of Stock A today and plan to close her position in one year. Stock A has a current price of 150. The price of Stock A after one year is equally likely to be 100, 120, 140, 160 or 180. The continuously compounding risk-free rate of return within next year, r, is equally likely to be 3.5%, 5% or 6% per annum. (i) (ii) (iii) (iv) (v) Let X be Jenny's profit in one year and Y be Stock A's price in one year. State the profit equation for Jenny. (1 mark) Construct a profit table based on your answer in part (a)(i). Determine Jenny's expected profit for one year. Calculate the variance of the profit. Calculate the downside semi-variance of profit. (3 marks) (2 marks) (2 marks) (2 marks) (a) Jenny short-sold one unit of Stock A today and plan to close her position in one year. Stock A has a current price of 150. The price of Stock A after one year is equally likely to be 100, 120, 140, 160 or 180. The continuously compounding risk-free rate of return within next year, r, is equally likely to be 3.5%, 5% or 6% per annum. (i) (ii) (iii) (iv) (v) Let X be Jenny's profit in one year and Y be Stock A's price in one year. State the profit equation for Jenny. (1 mark) Construct a profit table based on your answer in part (a)(i). Determine Jenny's expected profit for one year. Calculate the variance of the profit. Calculate the downside semi-variance of profit. (3 marks) (2 marks) (2 marks) (2 marks)
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a i The profit equation for Jenny is X Y 150 150 r where X is Jennys profit Y is Stock As price in o... View the full answer
Related Book For
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher
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