Question

Answer the following questions:

2.)Suppose you simultaneously buy 400 shares of SELE, and write two FEB 70 puts. What is your gain or loss if, at option expiration, the common stock of SELE. Sells for $ 57.38?


3.) In Problem 2 what is your profit or loss if SELE stock $ 77.38 at option expiration?


6.) USE the Black Scholes OPM for this problem .A stock currently sells for $43.50 and pays no dividends. A call option striking price =$45 on this security expires in sixty seven days. At present U.S treasury bills are yielding 5.3 present per year. You estimate the past volatility of the stock returns to be 44 percent. According to the black Scholes, OPM what is the value of this call?


1.) Consider the following three investments. Assume the T-bills yielded a constant 3 percent. Calculate the risk adjusted performance of each of the funds using the Sharpe measure.

Year         A       B       C
2003       +5% +4% +6%
2004       +0    +1      -1
2005       -5      -4       -10
2006       +8    +10    +18
2007       +5    +5      +7


4.) Calculate the time weighted rate of return for the monthly account activates shown here:

Cash Flow             Month             Ending Value
                      Balance forward          $23,000
+200                     January                  23,556
+200                     February                24,556
-500                      March                     23,965
-500                      April                        23,100
+200                     May                        22,900


1.)Suppose two weeks ago a speculator purchased four contracts of September soybeans at $ 6.30 ½ .The price today is $ 6.32 per bushed.
What is the person’s gain or loss?


2.) A farmer anticipates harvesting 50,000 bushels of wheat in September.How much money would the farmer receive from hedging by selling eight contracts of September wheat at a settlement price of $ 6.32 per bushel (a) today and (b) at delivery?

3.)Refer to a current issue of the Wall street journal. According to the expectations hypothesis, what is the best estimate for the wholesale price of heating oil next December?


4.) U.S importer anticipates a need for euro 8 million in several months. How many futures contracts would this person need to buy or sell to, hedge this requirement completely?

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