Answer Correctly all the questions.

The investment horizon date is three months, after which the equity index future price is expected to be Sh.217,800 and the bond futures price is expected to be Sh.92,878. The equity portfolio declines by 3% and the bond portfolio increases by 1% in three months period. Required: The overall value of the portfolio in three months period.The notional principals are Ksh. 75 million and $105 million. Payments are made semi-annually and on the basis of 30 days per month and 360 days per year. Required: i. "The initial exchange of payments that takes place at the beginning of the swap. ii. The semi-annual payments. iii. The final exchange of payments that takes place at the end of the swap. c) An investor wishes to purchase a European put option on Tausi Limited Shares. The details of the put option on Tausi Limited shares are provided below: Time to expiration 1 year Current market price, per share Sh.52 Exercise price per share Sh.45 . Model predicted up move 15% Model predicted down move 20% Annualized risk-free rate 5% Required: Using a one period binomial model, calculate the value of a one-year put option on Tausi Limited shares. d) A Sh.30 million portfolio consists of Sh.20 million of equity with a beta of 1.15 and Sh. 10 million of bonds with a modified duration of 6.25 and a yield-to-maturity of 7.15%. The portfolio manager would like to change the allocation to Sh. 15 million of equity and Sh.15 million of bond. In addition, the portfolio manager would like to adjust the equity beta to 1.05 and the modified duration on the bonds to 7. Equity index futures contract has a price of Sh. 225, 000 and a beta of 1.0. A bond futures contract is priced at Sh.92, 000 with an implied modified duration of 5.9 and an implied yield to maturity of 5.65%. The portfolio manager intends to use futures to synthetically sell Sh.5 million of equity, reduce the beta on the remaining equity, synthetically buy Sh. 5 million of bond and increase the modified duration on the remaining bonds.a) Describe the following four possible options positions: i. Long call. ii. Short call. iii. Long put. iv . Short put. b) . A Kenyan-company enters into a currency swap in which it pays a fixed rate of 6 percent in United States dollars ($) and the counter party pays a fixed rate of 5% in Kenya shillings (Ksh.)