HW #$5$

Please evaluate the list of stocks and bonds presented and use the information given plus your

knowledge of the needed computations to answer the ten questions listed below.

$1.$Which bond has the cheapest market price relative to its intrinsic value or price using a Fisher

model nominal yield as the discount rate?

$2.$Which stock is priced the cheapest compared to its intrinsic value or price using a CAPM

expected return and a constant growth DDM model.

$3.$If you bought $$10$ million of each bond at the market price $-$ how many $5-$year note futures

contracts with a face value of $$250K$ and a market value of $80$ and a duration of $4$ would you

need to buy or sell to hedge the entire portfolio? What is the portfolio duration?

$4$ If you bought $$10$ million of each stock at the market price $-$ how many SP$500$ E$-$Mimi futures

contracts worth $5,000$ index points with a $$50$ multiplier would you need to buy or sell to hedge

the entire portfolio? What is the portfolio beta?

$5.$What is the expected return of the portfolio based on the YTM of the bonds and CAPM

required rate of return of the stocks and the cash flow yield of the portfolio based on the current

yield and dividend yield of each security?$$50,000,000\mathrm{.}00$