Problem # 2

How does the disposition effect impact investor tax?

Problem # 3

If you can use past returns to build an investment strategy that creates value (with positive alpha), the market portfolio is not efficient. Explain why.

Problem # 4

What is the riskiest position: a short position on a call or a short position on a put? If we take the worst case scenario, what will be the losses for investors in each case?

problem 5

A call on Dupont stock, with a strike price of $ 40, expires in three months. What is the payoff for the option buyer if the stock goes for $ 55 in three months? Same question for the seller. What is the gain for the buyer if the stock goes for $ 35 in three months? For the seller? Graph the maturity payoff profiles of the buyer and seller of the call as a function of the stock price.

Problem # 6

You own Costo shares. You fear a drop in their price and therefore want to protect your wallet. How to do ?