Question 1. You are going long on a 50 day contract at F(0,T) = $55. Risk-free rate = 0.10. 25 days later, the spot price is $52. What is the value of the forward contract?
Question 2. You purchased JNJ stock at $50 per share. The stock is currently selling at $65. Your gains may be protected by placing a __________.
Question 3. You purchase one JNJ 75 put option for a premium of $3. Ignoring transaction costs, the breakeven price of the position is
Question 4. In order for you to be indifferent between the after tax returns on a corporate bond paying 8.5% and a tax-exempt municipal bond paying 6.12%, what would your tax bracket need to be?
Question 5. An investor invests 30 percent of his wealth in a risky asset with an expected rate of return of 0.15 and a variance of 0.04 and 70 percent in a T-bill that pays 6 percent. His portfolio's expected return and standard deviation are __________ and __________, respectively.
Question 6. You buy 100 shares of Doggie Treats Inc. that are currently selling at $22 per share. You post the 45% margin required on purchase. If your broker requires a 30% maintenance margin, at what stock price will you get a margin call? (You earn no interest on the funds in your margin account, and the firm does not pay any dividends.)