Question
a) On 1 July, Mr Brown holds 50,000 shares of ANZB stock. The market price is AUD 30 per share. Mr Brown is interested in
a)
On 1 July, Mr Brown holds 50,000 shares of ANZB stock. The market price is AUD 30 per share. Mr Brown is interested in hedging against movements in the market over the next month and decides to use the September ASX/SPI 200 futures contract. The index is currently 4,000 and one contract is for delivery of AUD 25 times the index. The beta of the stock is 1.3. What strategy should Mr Brown follow?
Select one:
a.
A short position in 30 contracts.
b.
A short position in 25 contracts.
c.
A long position in 20 contracts.
d.
A short position in 20 contracts.
b)
A dealer writes a March put option with a strike price of $30. The price of the option is $4. Under what circumstances does the dealer make a profit of $4?
Select one:
a.
The dealer makes a profit of $4 if the price of the stock is below $26 at the time of exercise.
b.
The dealer makes a profit of $4 if the price of the stock is above $30 at the time of exercise.
c.
The dealer makes a profit of $4 if the price of the stock is below $30 at the time of exercise.
d.
The dealer makes a profit of $4 if the price of the stock is above $26 at the time of exercise.
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