Assignment #1

1)Consider the following securities. Look up the market price or last price for them. Note time and date.

Name                               Symbol
Intel Corporation                INTC
Apple Inc                            APPL
Walmart Stores Inc             WMT
Bank of America                BAC
General Electric Company GE

a)What is the value of a price weighted index constructed from these securities?
b)Continued form part a. There is a 1 to 2 stock split for Apple stocks. How should you reflect this in your index?
c)Assume that you want to construct a value weighted index using thesesecurities and that you want the initial value of your index to be 10. What should be the devisor?
d)Construct an equally weighted index with the value of $1000. How many shares in each of these securities should be in your index?

2)Which security should sell at a higher price: A 3-year treasury note with a 3% coupon rate versus a 3-year treasury note with a 4% coupon rate?Explain.

3)Which security should sell at a higher price: A 3-month treasury bill or a 6-month treasury bill?Explain.

4)Which security should sell at a higher price: A 3-month expiration put option with an exercise price of $80 versus a 3-month put on the same stock with an exercise price of $85? Explain

5)Which security should sell at a higher price: A call option on a stock selling at $40, or a call option on another stock selling at $50 (all other relevant features of the stocks and options is assumed to be identical.)Explain.

6)Suppose investors can earn a return of 1.2% per 3 months on a treasury note with 3monthsremaining until maturity. What price would you expect a 3-monthmaturity treasury bill to sell for?

7)What is the after-taxreturn to a corporation that buys a share of preferred stock at $45, sells it at year-end at $45, and receives a $5 year-end dividend? The firm is in the 20% tax bracket.

8)An investor is in a 30% tax bracket. If a municipals bond offers a return of 5.25%, what is the equivalent taxable yield for this the investor?

9)Go to yahoo finance. What is the last price for an option on Apple stock with expiration of June15th,2018 and exercise price of $175? (when you are doing this assignment, make note of time/date)

a. Now Suppose you buy this option. What is the price that you pay? If the stock price on June15th, 2018is $180,will you exerciseyour call? What is the profit onyour position?
b. If you have aJunecall with exercise price $155and the stock price on June15th, 2018is $180, will you exercise your call?What is your payoff on your position?
c. If you have aJunecall with exercise price $220 and the stock price on June15th, 2018is $180, will you exercise your call?What is your payoff on your position?

10)Both a call and a put currently are traded on stock XYZ; both have strike prices of $85andexpirations of 6 months. What will be the profit to an investor who buys the call for $5in thefollowing scenarios for stock prices in 6 months? What will be the profit in each scenario to aninvestor who buys the put for $7?a.$75b. $80c.$85d.$90e. $95

11)You purchased afutures contracton corn at a futures price of 450 and at the time of expiration the price was 452. What was your profit or loss?There are 5,000 bushels per contract and prices are quoted in cents per bushel

Assignment #1 1)Consider the following securities. Look up the m...