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RSB [31]
3 years ago
6

You own a portfolio which is valued at $8.5 million and which has a beta of 1.3. You would like to create a riskless portfolio b

y hedging with S&P 500 futures contracts. The contract size is $250 times the index level. How many futures contracts do you need to acquire if the current S&P 500 index is 1310? Select one: a. Short 41 contracts b. Short 28 contracts c. Short 34 contracts d. Long 28 contracts e. Long 34 contracts
Business
1 answer:
Stells [14]3 years ago
8 0

Answer:

The answer is option (c)  Short 34 contracts

Explanation:

Solution:

Given that

The information about the portfolio is as stated below:

The value of the portfolio = $8.5 million

The beta = 1.3

The future contract of S&P price = $1310

The size of contract  = 250

Now,

To hedge the risk completely, the desired beta is =0

Thus,

The number of contracts is calculated as follows:

The Number of contract = (desired beta - portfolio beta)*portfolio value/(future price*contract size)

So,

The number of contracts = (0 - 1.3)*8500000/(1310*250) = -34

Then,

The negative sign means  it is going short.

Hence,

A total of 340 contracts must be short.

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4 0
3 years ago
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What are examples of criteria used in conditional formatting? Check all that apply. less than equal to added to divided by great
natima [27]

Answer:

  • Less than
  • Equal to
  • Greater than

Explanation:

Considering the listed options, the criteria used in conditional formatting are Less than, Equal to and Greater than

To make use of conditional formatting, follow the highlighted steps

1. Highlight cells that you want to format

2. Goto Home tab -> Styles -> then select Conditional Format

3. Select Highlight Cells Rules

4. Select the format type (this is where you get to pick either of greater than, equal to less than, etc.)

5. Enter the format value and how it is to be formatted

6. Press OK

3 0
3 years ago
Parker &amp; Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company
vaieri [72.5K]

Answer:

the proper cash flow amount is $11,060,784

Explanation:

The computation of the proper cash flow amount is shown below:

= land value + plant value + grading value

= $3,650,288 + 6,880,840 + $529,656

= $11,060,784

Hence, the proper cash flow amount is $11,060,784

So the same should be considered and relevant

7 0
3 years ago
At December 31, 2019, Swifty Corporation reported the following as plant assets.
Kay [80]

Answer:

April 01 2020

Land                                                            Debit          $ 2,200,000

Cash                                                           Credit                             $2,200,000

To record purchase of land

May 01 2020

Cash                                                            Debit         $ 504,000

Allowance for depreciation equipment    Debit         $ 363,720

Equipment                                                   Credit                              $ 840,000

Gain on sale of equipment                         Credit                              $   27,720

To record sale of equipment and to recognise gain on sale

June 01 2020

Cash                                                              Debit      $ 1,450,000

Land                                                              Credit                            $ 399,000

Gain in sale of land                                      Credit                            $1,051,000

To record sale of land and gain on the sale

July 01 2020

Equipment                                                     Debit    $ 2,480,000

Cash                                                              Credit                         $ 2,480,000

To record purchase of equipment

December 31 2020

Allowance for depreciation                          Debit    $ 491,000

Equipment                                                      Credit                        $ 491,000

To record retirement of equipment

The adjusting entry for depreciation is as follows:

December 31 2020

Depreciation expense - Equipment             Debit  $ 4,985,000

Depreciation expense - Buildings                Debit  $   578,200

Allowance for depreciation - Equipment     Credit                     $ 4,985,000

Allowance for depreciation - Buildings        Credit                     $    578,200

Explanation:

Computation for Depreciation expense for the year

Equipment Jan 01 2020                        $ 48,670,000  for 4 months @ 10 %

Sales - May 01 2020                              <u>$(     840,000)</u>

Adjusted balance May 01 2020            $ 47,830,000 for 2 months @ 10 %

Purchases July 01 2020                        <u>$   2,480,000</u>

Adjusted balance July 01 2020            $  50,310,000 for 6 months @ 10 %

Depreciation expense for 4 months = $ 48,670,000*10 % *4/12 = $1,622,333

Depreciation expense for 2 months = $ 47,830,000*10 % *2/12 = $   797,167

Depreciation expense for 6 months = $ 51,310,000*10 % *6/12 =<u>$ 2,565,500</u>          

Total depreciation equipment                                                      $ 4,985,000

Depreciation on buildings     $ 28,910,000 * 2 %                       $     578,200

Depreciation has to be recorded for full year on assets retired on December 31 2020

Computation of gain and loss on sale of equipment

Cost of equipment  purchased on January 1 2016                       $ 840,000

Depreciation rate                                          10 %

Equipment sold on May 01 2020

Depreciation charged for 4 years and 3 months @ 10 %

$ 840,000 * 4.33 *10 %                                                                   <u>$  363,720</u>

Net book value of equipment disposed on May 01 2020            $ 476,280

Sale value of equipment                                                                  <u>$ 504,000</u>

Gain on sale of equipment                                                             $ (27,720 )                                  

The gain on sale of land is the difference between the cost and sales proceeds since land is not depreciated

Sale proceeds - Cost = $ 1,450,000 - $ 399,000 =                      $ 1,051,000

The assets that was retired on Dec 31 2020 was purchased on December 31 2010 and was considered for depreciation for 10 years and was fully depreciated and had ni book value on the date of retirement

6 0
3 years ago
For the U.S. economy, money holdings are a
swat32

Answer:

C) small part of household wealth, and so the interest-rate effect is small.

Explanation:

During 2011 the per capita holdings of US dollars amount to only $2950, compared to the GDP per capita of $49,794 it is not a significant amount. Some government agencies estimate that nearly 2/3 of all $100 bills are held in foreign countries.

The decrease in money holdings can be attributed to an increase in the use of banking services, especially an increase in the use of debit cards, but also credit cards and checks.

6 0
3 years ago
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