16.

A portfolio manager has a $91 million portfolio that tracks the S&P 500. Currently the S&P 500 is trading at $1,208. How will the manager hedge the portfolio using index futures?

Select one:

a. Buy 301 futures contracts

b. Buy 753 futures contracts

c. Sell 753 futures contracts

d. Sell 301 futures contracts

17.

Lauren has a margin account and deposits $48,780. Assume the margin requirement is 56.00% and Gentry Shoe Co. is selling at $32. What is the value of Laurens equity if the stock price falls to $25?

Select one:

a. $29,725

b. $24,529

c. $36,839

d. $27,317

20.

Rock Solid has a stock portfolio worth $100 million, which tracks closely with the S&P 500. The portfolio manager fears that a decline is coming therefore buys put options to protect the entire portfolio when the S&P 500 was $1,004. The strike price the manager entered into was at $1,004. Suppose after a year the S&P 500 is $910 and the portfolio is worth $90 million. The options premium is $1 million. What is the value of the total position?

Select one:

a. $92,745,020

b. $99,362,550

c. $89,000,000

d. $98,362,550

21.

You, Obama, and Jordan believe the current dividend and growth rate is $1 and 5%. However, you believe the discount rate is 12%, Obama believes it is 10%, Jordan believes it is 7%. What will be the prevailing price if only you three are the market participants?

Select one:

a. $21.00

b. $22.50

c. $52.50

d. $21.43

22.

A portfolio manager has a $114 million dollar portfolio that tracks the S&P 500. Currently the S&P 500 is trading at $1,052. How will the manager hedge the portfolio using index options?

Select one:

a. Buy 1084 put options contracts

b. Sell 433 put options contracts

c. Sell 1084 put options contracts

d. Buy 433 put options contracts