I would really appreciate it if someone would solve this finance (Investment Portfolio management) Homework that consists of 4 questions.

FINA 3101 Fall 2017 Chapters 1, 2, & 3 problem set. Deadline to submit through Blackboard: 5pm Wednesday October 4th. Instructions: Answer completely each of the assigned questions and include all necessary supporting work. Students may work in groups of up to three total students. All group members' names should be clearly identified at the top of the submitted assignment. Each group must work independently of other groups, which is to say that any collaboration across groups is prohibited strictly. Googling for answer is prohibited. Assignments shall be submitted through Blackboard. Please designate only one student to submit the group's assignment. Late assignments will not be accepted. Failure to follow instructions will result in a reduced grade. Problem 1: Municipal Bonds. [6 points] A taxable investor has a 40% marginal tax rate. The investor is choosing between two bonds: An A-rated corporate bond with a 4% coupon rate, or an A-rated municipal bond with a 2.5% coupon. Assume both bonds are priced at their par value. a. [3 points] Which bond offers the investor a more attractive yield? b. [3 points] What taxable yield on the corporate bond would make the investor indifferent between the 2.5% municipal bond and the corporate bond? Problem 2: Creating an Index [20 points] Your task is to create an index from the 7 stocks in the table below. An excel spreadsheet would be useful. Using the information presented in the table, answer the following set of questions: a. [5] What is the return on the price-weighted index for each of Day 1, Day 2, and Day 3? b. [5] Now assume the index is value-weighted. What is the return to the value-weighted index on Day 1, Day 2, and Day 3? c. [5] If the index were equal-weighted instead of value-weighted, would the Day 1 return be greater than, less than, or equal to the value-weighted index return in part b? Provide intuition, in addition to a specific numerical return. d. [5] Compute the index weights at the end of Day 1 for the equal weighted index, assuming any rebalancing has not yet taken place. If the equally weighted index rebalances at the end of each day, what is the required turnover on Day 1? Stock Ticker Shares Outstanding BDT BK HJM HL KWF LBR MRKV 100,000,000 5,000,000,000 2,500,000,000 250,000,000 875,000,000 1,250,000,000 2,250,000,000 Day 0 200.00 5.00 12.50 150.00 85.00 22.00 15.00 Closing Prices Day 1 Day 2 190.00 188.00 5.25 5.50 13.75 14.50 145.00 142.00 83.00 82.00 23.00 24.00 16.50 17.00 Day 3 186.00 5.75 15.00 140.00 80.00 25.00 18.00 Problem 3: Buying on Margin [20 points] An investor decides to purchase shares of BUFF on margin. The investor has $750,000 cash in their account to use for the purchase (assume this is the only position in the account). The investor may borrow from their broker at 6% per year and must have an initial margin of at least 50%. The maintenance margin is 35%. The current market price of BUFF is $50.00 and BUFF pays quarterly dividends of $0.25 per share (assume the first dividend comes exactly 3 months from today). a. [4] Assume the investor utilizes their maximum margin potential. How many shares of BUFF can the investor purchase? b. [4] Below what stock price will the investor receive a margin call? c. [4] If the investor holds this position for 3 months and then sells the shares and repays the loan, what is the percentage profit (loss) if the market price of BUFF is $40.00 after 3 months? d. [4] If the investor holds this position for 3 months and then sells the shares and repays the loan, what is the percentage profit (loss) if the market price of BUFF is $60.00 after 3 months? e. [4] Compare your answers in C. and D. to the profit (loss) if the investor did not use the margin account and instead only purchased $750,000 worth of BUFF shares. Discuss the effect of leverage on returns. Problem 4: Short Selling [12 points] [8 points] A hedge fund manager has a negative view of retail stocks right now based on the belief that Amazon will drive many retailers into bankruptcy. To act on his view, the manager sells short 20,000 shares of Target Corp (TGT). The manager finds a broker willing to lend the shares. The current market price is 59.00 and TGT pays quarterly dividends of $0.62 per share. Assume the next dividend takes place 3 months from today, and subsequent dividends follow the same pattern. a. [3] Assume the manager maintains the short sale for 6 months. List all transactions involved in the short-sale, holding the position, and closing it out after 6 months. b. [3] What is the profit (loss) on the short sale if the market price of TGT is $40.00 when the manager closes the position after 6 months? Assume there is no fee to borrow the stock. c. [3] What is the profit (loss) on the short sale if the market price of TGT is $68.00 when the manager closes the position after 6 months? Assume there is no fee to borrow the stock. d. [3] Now assume the investor pays approximately $1.70 per share over the 6 months to borrow the stock. This is an approximation based on a 5% borrow fee on $68 for 0.5 years. Re-compute your answers to b. and c. incorporating that fee