A trader sells a strangle by selling a 6-month European call option with a strike price of $50 for $3 and selling a 6-month European put option with a strike price of $40 for $4. For what range of prices of the underlying asset in 6 months does the trader make a profit?
A dealer predicts that a current 180-day Treasury bill which costs $98 per $100 dollars of face will increase in price by one hundredth of one percent in two days. What is highest two-day repo rate he can pay and still expect to break even? Show any calculations
4. About bonds: a. What is a low-coupon bond? b. Does having a low coupon bond make the dollar price more volatile? Explain. c. In what sense does having a low coupon make a bond price more volatile? Explain. d. What is the effect of “callability” on the yield of a bond? Explain.
Finance Assignment Writing ServiceQuestion 1Check all that apply: What are your strategies to earn arbitrage profit if any? select ALL applicable strategies. A. buy this 2-yr treasury coupon bond and short sell the equivalent package of STRIPSB. buy the T-bill and sell the coupon bondC. buy the package of STRIPS and reconstitute them into a 2-yr treasury coupon bond to sell itD. buy the package of STRIPS and short sell the equivalent 2-yr treasury coupon bondE. buy this 2-yr treasury coupon bond and sell each of its cash flows as Treasury STRIPSQuestion 2Fixed-income arbitrage is to seek mispriced Treasury coupon bonds, through a set of linear equations in the following framework:P1=C1⋅P0,1 C1⋅P0,2 … (C1 F)⋅P0,TP2=C2⋅P0,1 C2⋅P0,2 … (C2 F)⋅P0,T……Pn=Cn⋅P0,1 Cn⋅P0,2 … (Cn F)⋅P0,TPart 1What are P1P1, P2P2, … , PnPn?A. fair prices of treasury coupon bonds at the timeB. fair prices of the STRIPSC. current prices of treasury STRIPS observed in the marketD. current prices of treasury coupon bonds observed in the marketI CHOSEN B. FAIR PRICES OF THE STRIPS AND IT WAS WRONGPart 2What do P0,1, P0,2, … , P0,TP0,T denote? Select the most accurate oneA. current market prices of all treasury coupon bonds standardized for $1 face valueB. 1-year STRIPS, 2-year STRIPS, … T-year STRIPSC. current market prices of all STRIPS standardized for $1 face valueD. fair prices of treasury coupon bonds standardized for $1 face valueI CHOSEN D. FAIR PRICES OF TREASURY COUPON BONDS STANDARDIZED FOR $1 FACE VALUE AND IT WAS WRONGPart 3About the framework of linear equations, which statements are true?Check all that apply:A. Because there are over 200 Treasury Notes and Bonds trading everyday, but only 30~60 STRIPS, not all equations can holdB. Not all equations can hold, because the market is not always efficientC. On the left-hand side of the equations are fair value of the coupon bonds, and right-hand side are market value of the coupon bondsD. Because the number of equation n is a lot greater than TT, not all n equations can holdE. Not all equations can hold, because market anomaly and market disruption happens from time to timeF. Because the total number of Treasury Notes and Bonds is a lot greater than total number of STRIPS, not all equations can holdI CHECKED A. AND D. AND IT WAS WRONGQUESTION 3A Treasury coupon bond has 5-year to maturity with a face value of $1,000 and a current market price of $946.58. The bonds pay coupon annually and have a yield to maturity of 4 percent. Jake, a bond speculator, just purchased the bond at the current market price. Part 1What is the coupon rate?I tried solving this, my answer was 20% and it was wrongPart 2Jake is not happy with the 4% YTM, he wants to earn higher rate of return. He anticipates to hold the bond for only one year and earn 6% in that year. His strategy is to cash in the first coupon at the end of the first year and then sell the bond right away. What market price should he predict in one year’s time?MY ANSWER WAS $910.91, IT WAS INCORRECTPart 3What will be the YTM in one year if his prediction is accurate? MY ANSWER WAS 3.33% AND IT WAS INCORRECT.Part 4What will be the market price in one year if the YTM stays at 4%?ALL INFORMATION ARE COPIED HERE FROM ACCEPI WEBSITE, THERE WAS NO OTHER MATERIALS OR INFO.PLEASE WRITE OUT THE STEPS BY STEPS AND EXPLANATION ON HOW TO SOLVE EACH PROBLEM. THANK YOU.
After-Tax Yield You need to choose between investing in a one-year municipal bond with a 7 per- cent yield and a one-year corporate bond with an 11 percent yield. If your marginal federal income tax rate is 30 percent and no other differences exist between these two securities, which would you invest in?
-Camila plans to go for vacation to Australia in 9 years from now. She estimates that she will need $28,778 for the trip. How much does she need to place in a saving account today that earns 8.10 percent per year (compounded quarterly) to accumulate this amount?
There are two states of the world tomorrow. With probability 1/5, the economy will be good. With probability 4/5, the economy will be bad. IBM stock return will be 15% if the economy is good, -5% if the economy is bad. Dell stock return will be 20% if the economy is good, −10% if the economy is bad. You own $1,500 of IBM and $1,500 of Dell.a. What is the expected return of your portfolio?b. What arethe covariance of IBM and Dell stock returns? c. What isthe variance of your portfolio?
1. Gladstone Corporation is about to launch a new product. Depending on the success of the new product, Gladstone may have one of four values next year: $150 million, $135 million, $95 million, and $80 million. These outcomes are all equally likely, and this risk is diversifiable. Gladstone will not make any payouts to investors during next year. Suppose the risk-free interest rate is 5%. Assume there are no taxes. -What is the initial value of Gladstone’s equity without leverage?Now assume Gladstone has zero-coupon debt with a $100 million face value due next year. -What is the initial value of Gladstone’s debt? -What is the yield-to-maturity of the debt? What is the expected return?What is the initial value of Gladstone’s equity? What is Gladstone’s total value with leverage?
Adams Enterprises, Inc. is considering the purchase of a new manufacturing facility for $110m. The facility is expected to be in operations for seven years, after which it will be shut down. The facility will be fully depreciated on a straight-line basis over seven years, and it will have no resale value. Revenues from the facility are expected to be $50m at the end of the first year, and are expected to increase at the rate of 5 percent per year. Production costs at the end of the first year will be $20m and they are expected to increase at 7% per year. The discount rate is 14%. Adams, Inc. has other ongoing, profitable operations, and it will be fully taxable for the profits generated by the new production facility. The corporate tax rate is 34%. Should the company accept the project?