《BFF5040-S1-2016-Tutorial-Questions-(3)》由会员分享，可在线阅读，更多相关《BFF5040-S1-2016-Tutorial-Questions-(3)（18页珍藏版）》请在金锄头文库上搜索。
1、BFF5040 Tutorial Questions Question based on week 1 topic due in week 2T1Q1 You are attempting to formulate an investment strategy、 On the one hand, you think there is great upward potential in the stock market and would like to participate in the upward move if it materializes、 However, you are not
2、 able to afford substantial stock market losses and so cannot run the risk of a stock market collapse, which you think is also a possibility、 Your investment adviser suggests a protective put position: Buy both shares in a market index stock fund and put options on those shares with 3month expiratio
3、n and exercise price of $780、 The stock index fund is currently selling for $900、 However, your uncle suggests you instead buy a 3month call option on the index fund with exercise price $840 and buy 3month Tbills with face value $840、a. On the same graph, draw the payoffs to each of these strategies
4、 as a function of the stock fund value in 3 months、 (Hint: Think of the options as being on one “share” of the stock index fund, with the current price of each share of the fund equal to $900、)b. Which portfolio must require a greater initial outlay to establish? (Hint: Does either portfolio provide
5、 a final payout that is always at least as great as the payoff of the other portfolio?)c. Suppose the market prices of the securities are as follows:Stock fund $900Tbill (face value $840) $810Call (exercise price $840) $120Put (exercise price $780) $ 6Make a table of the profits realized for each po
6、rtfolio for the following values of the stock price in 3 months: ST = $700, $840, $900, $960、Graph the profits to each portfolio as a function of ST on a single graph、d. Which strategy is riskier? Which should have a higher beta?e. Explain why the data for the securities given in part (c) do not vio
7、late the putcall parity relationship、T1Q2 a. Which type of order is often used together with short sales (sales of securities you dont own but have borrowed from your broker) to limit potential losses from the short position? i. Limit ordersii. Pricecontingent ordersiii. Stoploss ordersiv. Stopbuy o
8、rdersv. Market ordersb. Consider the following limitorder book for a share of stock of a specialist、 The last trade in the stock occurred at a price of $50、Limit Buy OrdersLimit Sell OrdersPriceSharesPriceShares49、7550050、2510049、5080051、5010049、2550054、7530049、0020058、2510048、50600i. If a market bu
9、y order for 100 shares es in, at what price will it be filled?ii. At what price would the next market buy order be filled?iii. If you were a security dealer, would you want to increase or decrease your inventory of this stock?T1Q3 a. De Trader opens a brokerage account and purchases 300 shares of In
10、ternet Dreams at $40 per share、 She borrows $4,000 from her broker to help pay for the purchase、 The interest rate on the loan is 8%、i. What is the margin in Des account when she first purchases the stock?ii. If the share price falls to $30 per share by the end of the year, what is the remaining mar
11、gin in her account? If the maintenance margin requirement is 30%, will she receive a margin call?iii. What is the rate of return on her investment?b. Old Economy Traders opened an account to short sell 1,000 shares of Internet Dreams from the previous problem、 The initial margin requirement was 50%、
12、 (The margin account pays no interest、) A year later, the price of Internet Dreams has risen from $40 to $50, and the stock has paid a dividend of $2 per share、i. What is the remaining margin in the account?ii. If the maintenance margin requirement is 30%, will Old Economy receive a margin call?iii.
13、 What is the rate of return on the investment?T1Q4 (Review key equations BKM 10 Chapter 5 page 162)Suppose your expectations regarding the stock price are as follows:State of the marketProbabilityEnding PriceHPRBoom0、3514044、5%Normal growth0、3011014%Recession0、358016、5%pute the mean and standard dev
14、iation of the HPR on stocksT1Q5 a. Investment management is far more tractable when rates of return can be well approximated by the normal distribution because:i. The normal distribution is symmetricii. The normal distribution belongs to a special family of distributions characterised as “stable”iii
15、. Scenario analysis is greatly simplifiediv. Statistical dependence of returns across securities can be summarized in a straightforward fashionv. All of the aboveb. Which of the following statement is correct?i. When the distribution of returns is positively skewed, the standard deviation underestim
16、ates riskii. When the distribution of returns is negatively skewed, the standard deviation underestimates riskiii. When a distribution is “skewed to the right”, its skewness measure is negativeiv. When a distribution is “skewed to the right”, its skewness measure is positivev. (i) and (iii) are correctvi. (
