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Master Essay

611 words - 3 pages

Name: Chuan Jing
(a)To be the 99% sure, x-µ/σ=2.33
(b)To be the 99.9%, x-µ/σ=3.62
B 20000 shares
H 50000 shares
C 30000 shares
A 60000 shares
E 25000 shares
F 25000 shares
The price is 42000
In a firm commitment where it buys the shares at 10 dollars, its profit depends the price it is able to be sold. If the price is higher than $10 it makes profit, but the price lower the $ 10, the bank lose money. In the best effort deal, its profit depends on how many shares be sold. The bank obtain a fee of $0.2*10 million=$2 million.
Semiannual interest =6% /2=3%
First year premium=0.011407*5000000/1.03=55374
Second year ...view middle of the document...

Tax is paid as though the investor owned the mutual fund investments
If the mutual fund realizes capital gains or dividends during a year, the investor has to pay taxes on the amount realized
The investor’s basis (i.e., the amount the investor is assumed to have paid for the mutual fund shares) is adjusted to avoid double taxation when the shares are sold
-5%: fee = 0

1%: fee of hedge fund = 2% fee of fund of funds=0

10%: fee of hedge fund = 2%+20%*10%=7%
fee of fund of funds=1%+10%*7%=1.7%

15%: fee of hedge fund = 2%+20%*15%=9.5%
fee of fund of funds=1%+10%*9.5%=1.95%

25% fee of hedge fund = 2%+20%*20%=12%
fee of fund of funds=1%+10%*12%=2.2%

Profit of stock strategy = (Price-94)*100
Profit of option strategy = (Price-94-4.7)*1000
When price >99.2, the option strategy is more profitable
1000, when price < $25
1000+170(price − 25), when25 < price < 40
1000+2, 550, when 40 < price

When the CP rate is 6.5% and Treasury rates are 6% with semiannual compounding, the CMT% is 6% and an Excel spreadsheet can be used to show that the price of a 30-year bond with a 6.25% coupon is about 103.46. The spread is zero and the rate paid by P&G is 5.75%. When the CP rate is 7.5% and Treasury rates are 7% with semiannual compounding, the CMT% is 7% and the price of a 30-year bond with a 6.25% coupon is about 90.65. The spread is therefore
max[0,(98.5 x 7/5.78 - 90.65)/100]
The rate paid by P&G is 35.39%

The trader has to pay 2400 initially.
When the share price is $14 there is a margin call

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