[CLO-1] The options for investing money are represented as the following: 1. 5% APR compounded quarterly II. 3% APR compounded continuously (1) is the best investment option. O True O False
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- You want to limit your 1% VaR to $100,000. How much can you own of an asset with 40% annualized volatility and Normal returns? Options A $1,703,273 B $5,871 C $93,200 D $107,296DO not Answer Question 1-6, Only below question A-C needed. 21. Consider the following balance sheet (in millions) for an FI: Assets Liabilities Duration = 10 years $950 Duration = 2 years $860 Equity $90 What is the FI's duration gap? What is the FI's interest rate risk exposure? How can the FI use futures and forward contracts to put on a macrohedge? What is the impact on the FI's equity value if the relative change in interest rates is an increase of 1 percent? That is, DR/(1+R) = 0.01. Suppose that the FI in part (c) macrohedges using Treasury bond futures that are currently priced at 96. What is the impact on the FI's futures position if the relative change in all interest rates is an increase of 1 percent? That is, DR/(1+R) = 0.01. Assume that the deliverable Treasury bond has a duration of nine years. If the FI…It is given that dP/dt = rP (r being the annually compounded interest rate and P is the amount in the account at any given time). Suppose that an account earns at an annual rate of r percent compounded continuously and a person is drawing an income of H dollars per year withdrawn continuously (impossible, but a modeling assumption). Use phase line analysis to analyze the behavior of the account. Discuss the meaning of any equilibrium points and their stability. If r = 10% (a reasonable rate for long-term stock investments), and H = $10,000, how long should an initial investment of $50,000 be left untouched so that when withdrawals begin the capital is not depleted?
- Consider the following balance sheet (in millions) for an FI: Assets Liabilities Duration = 10 years $950 Duration = 2 years $860 Equity $90 What is the FI's duration gap, and FI's interest rate risk exposure ? How can the FI use futures and forward contracts to put on a macrohedge? What is the impact on the FI's equity value if the relative change in interest rates is an increase of 1 percent? That is, DR/(1+R) = 0.01. Suppose that the FI in part (c) macrohedges using Treasury bond futures that are currently priced at 96. What is the impact on the FI's futures position if the relative change in all interest rates is an increase of 1 percent? That is, DR/(1+R) = 0.01. Assume that the deliverable Treasury bond has a duration of nine years. If the FI wants to macrohedge, how many Treasury bond futures contracts does it need?Given D1 = P2.00, beta=0.9, risk- free rate -5.6%, market risk premium = 6%, current stock price = P25, and the market is in equilibrium. What should be the stock price in 3 years?What is the price of an American CALL option that is expected to pay a dividend of $2 in three months with the following parameters? s0 = $40d = $2 in 3 monthsk = $43 r = 10%sigma = 20%T = 0.5 years (required precision 0.01 +/- 0.01)
- Suppose we observe the following rates: 1R1 = 0.75%, 1R2 = 1.20%, and E(2r1) = 0.907%. If the liquidity premium theory of the term structure of interest rates holds, what is the liquidity premium for year 2, L2? (Do not round intermediate calculations. Round your answer to 3 decimal places.)You have account receivables: ₤5 m in one year. o InterestUS: 6.10% per annum & InterestUK: 9% per annum o Spot exchange rate: $1.50/£ & Forward exchange rate: $1.46/£ (1-year maturity) o Put option strike price: $1.46/£ & Put option premium: $0.02/£ How much will you receive in $ if you use the money market hedge?Only typed answer Suppose that the current 4-year treasury security rate is 5.5 percent and the 1-year treasury rate is 3.75 percent. According to the unbiased expectations theory, what should be the 3-year expected rate 1-year from now? Group of answer choices 6.09% 6.39% 5.88% 4.74%
- Assume that the CAPM is true, Rf = 5%, Rm= 15% σm = 0.1. An investor with $10,000 to invest builds a portfolio, Q, of T-bills and the market portfolio. This means that: a) it would be possible for the investor to obtain a return of 17% on portfolio Q b) if portfolio Q were composed of short-selling $2,000 in T-bills and the remainder is the market portfolio, then Pqm = 1, βq = 1.2 and σq = 0.12 c) to obtain a return of 17% from portfolio Q the investor would need to invest $12,000 in the market portfolio d) all of the above are true e) only a) and b) above are true. Pls show procedure, thanks1An annual percentage rate (APR) is determined by annualizing the rate using compound interest. Select one: True False 2The more frequent the compounding, the higher the future value, other things equal. Select one: True False 3Which statement is NOT true?  a. Figure A correctly displays the relation between FVs of $1 investment at the interest rates 12.7% and 9.8%. b. Investment of $1 needs more than 7 years to double its value at the rate 9.8%, while only requiring less than 6 yeas to double at 12.7%. c. Figure B correctly displays the relation between PVs of $3 future value at the interest rates 12.7% and 9.8%. d. A discount factor for 5 years at 12.7% is lower than the discount factor for 5 years at 9.8%.1An annual percentage rate (APR) is determined by annualizing the rate using compound interest. Select one: True False 2The more frequent the compounding, the higher the future value, other things equal. Select one: True False 3Which statement is NOT true?  a. Figure A correctly displays the relation between FVs of $1 investment at the interest rates 12.7% and 9.8%. b. Investment of $1 needs more than 7 years to double its value at the rate 9.8%, while only requiring less than 6 yeas to double at 12.7%. c. Figure B correctly displays the relation between PVs of $3 future value at the interest rates 12.7% and 9.8%. d. A discount factor for 5 years at 12.7% is lower than the discount factor for 5 years at 9.8%. 4After reading the fine print in your credit card agreement, you find that the "low" interest rate is actually an 17.05% APR, or 1.4208% per month. What is the effective annual rate? a. 18.45% b. 19.41% c. 18.82% d. 19.56% 5A zero-coupon bond is a bond that pay no…