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posledela
3 years ago
8

A company has a $36 million portfolio with a beta of 1.2. The futures price for a contract on the S&P index is 900. Futures

contracts on $250 times the index can be traded. What trade is necessary to achieve the following. (Indicate the number of contracts that should be traded and whether the position is long or short.)
a. Eliminate all systematic risk in the portfolio
b. Reduce the beta to 0.9
c. Increase beta to 1.8
Business
1 answer:
Blizzard [7]3 years ago
7 0

Answer:

Explanation:

A:

Number of contracts required:

= (0-1.2)×36,000,000÷(900×$250)

= -192

Since negative value, short 192 contracts.

B:

= (0.9 - 1.2)×36,000,000÷(900×$250)

= -48

Since negative value, short 48 contracts.

C:

= (1.8 - 1.2)×36,000,000÷(900×$250)

= 96

Since positive value, long 48 contracts.

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The most recent data from the annual balance sheets of N&B Equipment Company and Jing Foodstuffs Corporation are as follows:
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Answer: N&B Equipment Company:

Current ratio = 1.33

Quick ratio = 0.746

Jing Foodstuffs Corporation:

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Quick ratio = 0.928

Explanation:

For N&B Equipment Company:

Current\ Ratio=\frac{Current\ Assets}{Current\ liabilities}

Current\ Ratio=\frac{900}{675}

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Quick ratio=\frac{Current\ Assets - Inventory}{Current\ Liabilities}

Quick ratio=\frac{900 - 396}{675}

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For Jing Foodstuffs Corporation:

Current\ Ratio=\frac{Current\ Assets}{Current\ liabilities}

Current\ Ratio=\frac{1,400}{844}

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Quick ratio=\frac{Current\ Assets - Inventory}{Current\ Liabilities}

Quick ratio=\frac{1,400 - 616}{844}

                        = 0.928

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