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Chapter 5: Derivative Markets

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Essentials Of Investments
Pages: 485 - 594
Essentials Of Investments

Essentials Of Investments

Book edition 9th
Author(s) Zvi Bodie, Alex Kane, Alan Marcus, Alan J. Marcus
Pages 748 pages
ISBN 9780078034695

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114 Questions for Chapter 5: Derivative Markets

  1. Use the following case in answering Problems 10 – 15 : Mark Washington, CFA, is ananalyst with BIC. One year ago, BIC analysts predicted that the U.S. equity market wouldmost likely experience a slight downturn and suggested delta-hedging the BIC portfolio.

    Found on Page 554
  2. Use the following case in answering Problems 10 – 15 : Mark Washington, CFA, is an analyst with BIC. One year ago, BIC analysts predicted that the U.S. equity market would most likely experience a slight downturn and suggested delta-hedging the BIC portfolio.

    Found on Page 553
  3. Consider a stock that will pay a dividend of D dollars in one year, which is when a futures contract matures.

    Found on Page 589
  4. Imagine that you are holding 5,000 shares of stock, currently selling at $40 per share. You are ready to sell the shares but would prefer to put off the sale until next year due to tax reasons. If you continue to hold the shares until January, however, you face the risk that the stock will drop in value before year-end. You decide to use a collar to limit downside risk without laying out a good deal of additional funds. January call options with a strike price of $45 are selling at $2, and January puts with a strike price of $35 are selling at $3. What will be the value of your portfolio in January (net of the proceeds from the options) if the stock price ends up at (a) $30? (b) $40? (c) $50?

    Found on Page 513
  5. a. A single stock futures contract on a non-dividend-paying stock with current price $150 has a maturity of one year. If the T-bill rate is 3%, what should the futures price be?

    Found on Page 589
  6. Use the following case in answering Problems 10 – 15 : Mark Washington, CFA, is an analyst with BIC. One year ago, BIC analysts predicted that the U.S. equity market would most likely experience a slight downturn and suggested delta-hedging the BIC portfolio.

    Found on Page 554
  7. The Excel Applications box in the chapter (available at www.mhhe.com/bkm ; link to Chapter 17 material) shows how to use the spot-futures parity relationship to find a “term structure of futures prices,” that is, futures prices for various maturity dates.

    Found on Page 589
  8. Suppose you think FedEx stock is going to appreciate substantially in value in the next year. Say the stock’s current price, S 0, is $100, and the call option expiring in one year has an exercise price, X, of $100 and is selling at a price, C, of $10. With $10,000 to invest, you are considering three alternatives:

    Found on Page 513
  9. One Chicago has just introduced a new single stock futures contract on the stock of Brandex, a company that currently pays no dividends. Each contract calls for delivery of 1,000 shares of stock in one year. The T-bill rate is 6% per year.

    Found on Page 589
  10. Use the following case in answering Problems 10 – 15 :

    Found on Page 554

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