Giving examples distinguish with between a forward and a future contract(4mks)

(b) The shares of a Company are currently trading at ksh 3.5 per share,A European call option exists on the shares with an exercise price of 3.3 ksh per share with 3 months to maturity,The risk free rate is 8%,the variance of rate of return on the shares is 12%.

Determine the value of call option using Black-Scholes option pricing model (6mks)

(c) Propose four investments constrains considered by a portfolio manager while developing an investment policy statement (IPS) for a client. (4 marks)

(d) Wakabe is a portfolio manager, on an annual basis he has a 5% portfolio return with a standard deviation of 10% and a tracking error of 5%. Assume that the bencharmark return is 2.5% per annum and a risk free rate is 0.1 % per annum

Required: (i) The sharpe ratio of the portfolio manager (2 marks)

( ii) The information ratio of the portfolio manager (2 marks)

e)Discuss four factors that could be used in predicting the beta of a company (4 marks)

f)Discuss various risks associated with margin accounts