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You are given the following information for Stock A and Stock B.




1: You are given the following information for Stock A and Stock B.;Rate of Return on stock if this demand occurs;Demand for the companys;Probability of this;Firm A;Firm B;products;demand occurring;Strong;p;18%;12%;Normal;0.6;10%;8%;Weak;q;-21%;1%;You created a portfolio by investing $3,000 in stocks of firm A and the remaining $7,000 of your wealth in stocks of firm;B. The expected return of your portfolio is 7.382%. What is the correlation coefficient of the returns of firm A and;returns of firm B? In addition, what is the portfolio variance of your created portfolio?;Problem # 2: Seven months ago, Ms. Peeru purchased 400 shares of XYZ Inc. stock on margin at a price per share of $36.;The initial margin requirement on her long account is 60 percent and the maintenance margin is 40 percent. The call;money rate is 3.6 percent and she pays 2 percent above that rate. In addition, on the same day, Ms. Peeru also short sold;200 shares of PQR Inc. stock as price per share of $20. The initial margin requirement on her short account is 70 percent;and the maintenance margin is 40 percent. She will earn interest at 3% per annum compounded annually on her initial;margin deposit of short account. Today at the end of the trading day, she covered both positions, when the market prices;of XYZ Inc. and PQR Inc. were $38 per share and $19 per share, respectively. Assume that she has not received any;margin call in between. What is her annualized rate of return or her holding period return on an annualized basis?;Problem # 3: At the beginning of a trading day, you short sold 500 shares of Jasper stock at $41 a share, 100 shares of;Tasper at $10 a share, and 200 shares of Casper at $20 a share. Your initial margin is 60% and the maintenance margin is;40 percent. Assume that your initial equity is equal to the initial margin requirement. At the end of the day, the closing;price of Jasper was $40 a share and that of Tasper was $11 a share. And your account equity position was $50 above the;maintenance margin level. Assume that, if at all you get a margin call, then you need to deposit additional (margin);amount till the level of maintenance margin. What was the price of Casper per share at the end of the trading day?;Problem # 4: a 10-year Treasury bond with par value of $1,000 has a 7% coupon rate and pays interest every six months.;The bond is two years old and has just made its fourth payment. The current market price of the bond is $987.65. What is;the annualized yield to maturity of this bond?;Problem # 5: FIRE Incs outstanding bond has a $1,000 par value, and it matures in 10 years. It pays coupon payments;semiannually, and the market selling price of it is $1,150. You are also given that the annual required rate of this bond;(Yield to Maturity) is 7.50% per annum. What is the bonds coupon interest rate?;Problem # 6: You work with the Treasury department. You are asked to value a five-year zero coupon bond of face value;$1,000. In the bond market, the price of a regular coupon T-bond, of five-year maturity with coupon rate of 8% and the;face value of $1,000 is $1,095. You are also given the prices of different maturities zero-coupon bonds of face value;$100.;Zero coupon bond (maturity);Price;One year;$95.24;Two year;$89.85;Three year;$84.56;Four - year;$79.58;1;What is the price of a five-year zero coupon bond of face value $1,000?;2;View Full Attachment;Additional Requirements;Min Pages: 1;Level of Detail: Show all work


Paper#30333 | Written in 18-Jul-2015

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