Options, Futures And Swaps 2

Please prepare a written  report in a form of a pdf file, that  will include your individual solution to the following problem. Attach also a separate file with all necessary calculations.

Problem to be solved:

The absolute return investment fund is considering completing the portfolio with one company in three months from 20th April 2020. The manager ask you to choose preferred company on your own. The the value of the entire contract includes

  • cost of buying stock shares at the market in three months,
  • cost of hedging against market risk of the price of an underlying to go up within three months,
  • cost of hedging against interest rate risk

You are authorized to pay for the whole contract maximum 1000000USD (or its equivalent in foreign currency given spot exchange rates from 20thApril 2020).  Please explain the details of a deal, and calculate its. cost separately for stock, hedging against market risk, hedginf against interest rate risk considering the following assumptions:

  •  Justify the choice of a company – what it is potential to generate positive rate of return? How many stocks of this company can you buy using authorized amount of money ?
  • Given the speculative (stochastic) nature of the investment, you are recommended you to buy a three month  OTC European ATM call option on this stock.Calculate option premium for each stock and the total value of an option contract. Calibrate option parameters to market conditions.  If the considered stock will pay dividends in next three months, adjust your valuation accordingly. Justify the choice of volatility and risk-free rate.
  •  The contract will be financed via credit  with a 3-year maturity and interest paid on an annual basis. You are recommended to use an interest rate LIBOR swap or a CAP contract, to protect your payments against unforeseen changes of interest rates. Which one will you use – justify your choice by explaining difference in mechanisms of the two contract types and cost of the two. Assume, that a notational principal of the interest rate contract should cover both the value of shares to be bought and the value of an opton. Calibrate swap parameters to real interest rates conditions and justify your estimations.

Written APA Compliant

Skillsoft

1475

Page 2

Skillsoft

1475

M: Male Speaker

M: I am often asked by companies, “Nigel, can you help our managers and leaders to think outside the box?” And when I ask them, “What box do you mean?” They say, “Oh, you know what I mean!” Now you know what I mean is English for I have no idea how to articulate that because you are the box. You’re so close to it that other perceptions, new ways of doing business, innovative technologies are almost certainly invisible to you. There is one way that stops you from thinking outside the box or as I am going to call it actually changing the box if you want to be truly innovative. And it’s what I describe as yes/but thinking. You’re faced with a new idea, the dinosaur part of our brain seems to want to assassinate that idea by saying, “Yes, but—“ Or what are the other phrases we use to yes/but, a new innovative suggestion? Well, try “with respect”. Or if you hate the idea, “With greatest respect”. Or “I hear what you say, but”. “I see your point, but.” What do these actually mean? I hear what you say? I’m not listening. I see your point. Mine is better. With respect. Get lost. Yes, but. No.

Now I am not trying to destroy your whole vocabulary. But what I am saying is that new ideas are very easily yes/butted. And to be more open minded, to change the box, the expectation of your industry, your organization, your customers, what you need to be able to do is develop the reflex of why not or what if.

Now here are some famous yes/buts from business history, one of my all time favorites, is the head of the British Post Office, a Mr. Preiss [ph] , in the 1890s, yes/butting the innovation which we now know as the telephone. He said, and this is in the parliamentary __ records, for geographical reasons the Americans require the telephone. We, in England, do not. We have plenty of messenger boys. Now imagine my delight presenting that quote to the senior management of a British telecoms company a few years ago and they said, “Yeah, well, I am afraid some of that yes/but still seems to exist in our culture.”

So another example is Ken Olson of DEC Digital Equipment, great innovator in his time. But in 1979 he gave us one of the most famous yes/buts in business history. He said, “Yes, but who on earth would want a computer at home?” Well, actually only about 800 million people it seems, Ken. And so perhaps not surprising to see DEC eventually swallowed up by a PC manufacturer, eventually disappeared. Even his nerdship himself, Bill Gates III, in the early mid-‘90s, yes/butted the economic potential of the internet. But to his credit did a great u-turn and got Microsoft’s resources focused on realizing that this seriously was a why, not, what if, and was about to happen and if they didn’t get on board they would be history.

But think about this very person. I am sure that you never yes/but ideas from a colleague, from your boss, from an employee, from your husband, wife, or children. Do something for 24 hours. But for no longer. We would probably go crazy. County how many times you think or say a yes/but to a new suggestion that you hear from television, that you read in the papers, that you hear from somebody else. Don’t do it for any longer, you’ll go crazy. But just to attune yourself to the fact that all of us think of ourselves as open-minded, but the only people who are really open-minded are the village idiot or the dead. We are all processing, analyzing and if we are negative, yes/butting new ideas and therefore missing the opportunity to change the box of our own life, our own organization, our own business.

[END OF RECORDING] [PH]

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Estate And Retirement Planning

You have been the Financial Adviser for Ken and Joan Hill for the last 3-years. You have asked them to stop by for an annual review. During the annual review you discover the following information: Ken and Joan Hill gave $35,000 to their son for a down payment on a house in 2009.

Questions:

1. How much gift will be owed by Ken and Joan for giving the gift to their son?

2. How much income tax will be owed by their son?

3. List three advantages of making this gift.

4. You are the Financial Adviser for the Hill’s. They did not ask you for advice before making this gift to their son. If Ken and Joan Hill had asked you for your expert advice, what would you have recommended?

 

To your surprise, Joan Hill is now deceased. Joan Hill had a $2,500,000 net worth at the time of her death in 2009. In addition, she had a $350,000 whole life policy with a $40,000 of accumulated cash value; her niece was designated as the beneficiary. She also had a $50,000 pension plan benefit.

Questions:

5. What was the value of Joan’s gross estate?

6. How much of her estate is taxable?

7. How much estate tax will need to be paid?

8. How much of her estate must pass through probate? 9. What are the four different taxes that may be imposed on an estate?

Not All Companies Are Viewed as Equal

Not All Companies Are Viewed as Equal

In the land of free trade the public does not view all industries as equal. Do you believe that is ethical? Do you believe that some industries are unfairly targeted? Should it be consumers’ choice to partake in products that are not healthy for them, or do those companies have an ethical obligation to protect people? In this assignment you will choose one (1) industry to write about. Possible industries to research could be tobacco, soda, alcohol, casinos, or candy companies, just to name a few.

Write a one and a half to two (1 ½ – 2) page paper in which you:

1.  Become an advocate for either the consumer or the industry. Prepare an argument explaining the major reasons why you support either the consumer or the industry.

2.  Explain the role capitalism plays in corporate decision-making.

3.  Discuss if you believe it is possible for a company to cater to both its best interest and that of the consumer conjointly or if one always has to prevail. Justify your response.

4.  Use at least two (2) quality references. Note: Wikipedia and other Websites do not qualify as academic resources.

Your assignment must follow these formatting requirements:

  • Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
  • Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

The specific course learning outcomes associated with this assignment are:

  • Determine the considerations for and process of ethical business decision making to balance corporate and social responsibilities and address moral, economic, and legal concerns.
  • Analyze selected business situations using the predominant ethical theories, such as utilitarian, Kantian, and virtue ethics to guide ethical business decision making.
  • Use technology and information resources to research issues in business ethics.
  • Write clearly and concisely about business ethics using proper writing mechanics.

MUST BE ORIGINAL