Question
1. Consider company ABC that has a profit margin on sales above the industry average. ABCs ROA is in line with the industry average. This
1. Consider company ABC that has a profit margin on sales above the industry average. ABCs ROA is in line with the industry average. This implies that ABCs asset turnover is in line with the industry average too.
Is the above statement true or false? Give explanations.
2.
A short futures position is similar to a short forward position. The main difference is that a short position in futures gives the right to sell the underlying asset whereas a short forward position obligates the trader to sell.
Is the above statement true or false? Give explanations.
3.
Consider an investor with the following portfolio: (1) short position in stock F, (2) an investment of proceeds from sale of stock F in a risk-free bond maturing on the day stock F should be returned to its owner, (3) a short position in a futures contract with stock F as underlying that expires on the same date when stock F should be returned to the owner. If the futures contract is priced fairly, the expected cash flow at futures maturity is $0.
Is the above statement True or False? Give explanations.
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