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Question
The stock price of Atlantis Corp. is $43 today. The risk-free rate of return is 10%, and Atlantis Corp. pays no dividends. A call option on Atlantis Corp. stock with an exercise price of $40 and an expiration date 6 months from now is worth $5 today. A put option on Atlantis Corp. stock with an exercise price of $40 and an expiration date 6 months from now should be worth __________ today.
A. $.05
B. $.14
C. $2
D. $3.95
Answer
This answer is hidden. It contains 29 characters.
Related questions
Q:
Which of the following does not approximate the performance of a buy-and-hold portfolio strategy?
A. An equally weighted index
B. A price-weighted index
C. A value-weighted index
D. All of these options (Weights are not a factor in this situation.)
Q:
Under a "passive core" portfolio management strategy, a manager would ___________.
A. index the entire portfolio
B. index part of the portfolio and actively manage the rest
C. delegate the management of core segments of the portfolio to other managers
D. actively manage the entire portfolio
Q:
An active asset allocation strategy involves _________.
A. investing in the stock of companies that are price takers
B. maintaining approximately the same proportions of a portfolio in each asset class over time
C. varying the proportions of a portfolio in each asset class in response to changing market conditions
D. selecting individual securities in different sectors that are believed to be undervalued
Q:
An employee has an average wage of $60,000 and has worked for the firm for 25 years. The defined benefit pension plan pays retirees 2.5% of the average wage times the years of service. The employee can expect to receive _______ per year upon retirement.
A. $18,000
B. $37,500
C. $45,325
D. $55,250
Q:
For a bank, the difference between the interest rate charged to borrowers and the interest rate paid on liabilities is called the __________.
A. insurance premium
B. interest rate spread
C. risk premium
D. term premium
Q:
Which one of the following would be considered a "cash equivalent" investment?
A. Treasury bills
B. Common stock
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D. Real estate
Q:
You are thinking of investing in one of two assets. Asset A has higher systematic risk than asset B. You can be sure that asset A's _______ return will be higher than asset B's, but you can't be sure if asset A's _______ return will be higher than asset B's.
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B. real; nominal
C. expected; realized
D. nominal; expected
Q:
Major functions of the investment committee include all but which one of the following?
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Q:
The asset universe is the _____________________.
A. set of investments in which an investment company can legally invest
B. existing set of assets the investment company currently owns in one or more of its portfolios
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Q:
An investor is looking at different retirement investment choices, and he is willing to accept one with upside potential even if that means sacrificing certainty. Which of the following will he most likely select?
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Q:
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I. The fund should have a target rate of return of at least 10%.
II. The limitations on spending require that the fund limit its considerations to growth stocks.
III. The requirement to spend money out of the fund this year provides a liquidity constraint that may reduce the fund's rate of return.
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Q:
An investor with high risk aversion will likely prefer which of the following risk and return combinations?
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B. Expected return = 14%, historical standard deviation = 19%
C. Expected return = 16%, historical standard deviation = 21%
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Q:
An investor refuses to invest in any firm that produces alcohol or tobacco. This is an example of a ___________ constraint.
A. return requirement
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C. liquidity
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Q:
A nonprofit organization offers a 5% salary contribution to John's 403b plan regardless of his own contributions, plus a matching 5% when John contributes 5% of his salary. John makes $56,000 a year.
What is the amount of the total contribution to his 403b if John contributes 5% of his own money?
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B. $8,400
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Q:
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Q:
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A. 15; 20
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Q:
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Q:
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C. tax deductible; not tax deductible
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Q:
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Q:
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A. older workers
B. high-income workers
C. younger workers
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Q:
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A. income
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Q:
Tilting your retirement savings plan toward your later years should only be done by investors _____________.
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II. Durability of marriage
III. Expected length of your base (Social Security) annuity
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Q:
Contributions to a _____________ are not tax deductible.
A. traditional retirement plan
B. Roth retirement plan
C. 401k plan
D. 403b plan
Q:
A decrease of 1% in both your tax exemption and your income tax rate would, on net, _______________.
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B. make you worse off
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Q:
A typical hedge fund incentive bonus is usually equal to ________ of investment profits beyond a predetermined benchmark index.
A. 5%
B. 10%
C. 20%
D. 25%
Q:
In a 2011 study, Agarwal, Daniel, and Naik documented that hedge funds tend to report average returns in ____________ that are __________ than their average returns in other months.
A. September; lower
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Q:
Market-neutral hedge funds may experience considerable volatility. The source of volatile returns is the use of _________.
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C. directional bests
D. net short positions
Q:
You manage a $15 million hedge fund portfolio with beta = 1.2 and alpha = 2% per quarter. Assume the risk-free rate is 2% per quarter and the current value of the S&P 500 Index is 1,200. You want to exploit the positive alpha, but you are afraid that the stock market may fall and you want to hedge your portfolio by selling 3-month S&P 500 future contracts. The S&P contract multiplier is $250.
How much is the portfolio expected to be worth 3 months from now?
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C. $15,600,000
D. $16,000,000
Q:
You manage a $15 million hedge fund portfolio with beta = 1.2 and alpha = 2% per quarter. Assume the risk-free rate is 2% per quarter and the current value of the S&P 500 Index is 1,200. You want to exploit the positive alpha, but you are afraid that the stock market may fall and you want to hedge your portfolio by selling 3-month S&P 500 future contracts. The S&P contract multiplier is $250.
When you hedge your stock portfolio with futures contracts, the value of your portfolio beta is __________.
A. 0
B. 1
C. 1.2
D. The answer cannot be determined from the information given.