Answer: c. is made by a cash settlement based on the index value
Explanation:
Stock index futures are settled by cash sort of like index options.
This means that there is no delivery of the actual underlying asset at the end of the contract.
The cash / profit is determined by the starting and ending prices of the futures contract.
Answer:
7.32%
Explanation:
<em>The price of a bond is the present of its interest payment and the present value of redemption value (RV</em>
Present value of the Redemption Value (RV) =
FV× (1+r/2)^(-2×n)
FV- 2000, r- yield rate, r/2= 6.74%/2 = 3.37%, n-22
=2000× (1.0337)^(-2×22)
= 465.233
Present Value of the coupon payment =Price of bond - PV of RV
= (106.657% × 2000) - 465.233
= $1667.90
PV of coupon payment= A × (1-(1+r)^(-2×n)
A- semiannual coupon payment, r -yield
1667.90 = A × (1-(1.0337)^(-2*22))/0.0337
1,667.90 = A × 22.7710
A = 1,667.90/22.7710
A= 73.246
Annual coupon payment = 2× 73.246= 146.493
Annual coupon rate = coupon payment/ face value
= (146.493/2,000 )× 100
= 7.32%
Answer:
Investment in stock C is $122450.3311 rounded off to $122450.33
Explanation:
A portfolio which is equally as risky as market should have a beta equal to the beta of the market as beta is a measure of the riskiness. The beta of market is always equal to 1. The formula for beta of a portfolio is as follows:
Portfolio beta = wA * Beta A + wB * Beta B + ... + wN * Beta N
Where w represents the weight of each stock in the portfolio.
Let investment in stock C be x
1 = 146000/500000 * 0.91 + 134000/500000 * 1.36 + x/500000 * 1.51
1 = 0.26572 + 0.36448 + 1.51x / 500000
1 - 0.6302 = 1.51x / 500000
0.3698 * 500000 = 1.51x
1844900 / 1.51 = x
x = $122450.3311 rounded off to $122450.33
Answer:
Conversion costs= $488,000
Explanation:
Giving the following information:
depreciation expense - factory building, $133,000
direct labor, $250,000
factory utilities, $105,000
<u>The conversion costs are the sum of direct labor and manufacturing overhead.</u>
<u></u>
Manufacturing overhead= 133,000 + 105,000= 238,000
Direct labor= 250,000
Conversion costs= $488,000
Today's share price for CCN is $16.67
Today's share price for CCN can be determined using the Gordon constant dividend growth model
The Gordon growth model is used to determine the value of the share of a firm using the value of its dividend with the assumption that the firm grows at a constant rate.
The formula of the Gordon constant dividend growth model :
price = d1 / (r - g)
d1 = next dividend to be paid = $0.50
r = cost of equity = 12%
g = growth rate = 9%
0.50 / (12% - 9%)
0.50 / 3%
0.50 / 0.03
= $16.67
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