The Theory and Practice of Investment Management - Essay Example

Only on StudentShare

Extract of sample
The Theory and Practice of Investment Management

The computations are shown in the following table. Table no.1 Number of contracts necessary to be hedged Contract Amount $ 7,500,000.00 Hedge Ratio 0.5 Price 97 No of contracts 38660 Part 2 I. In order to close the position, the company should buy futures contracts for March 2013, at the price 97.6. II. The transaction on the futures market brought a loss equal to: no of contracts *(selling price-buying price). The computations are shown in the following table. Table no.2 Final position from the futures transaction Price (short position) 97 Price (long position) 97.6 No of contracts 38660 Loss $ - 23,195.88 Part 3 I. The relationship between the price of the future contract and the interest rates on the market is an inverse relationship. So, for this example, the price of the future contract has raised implying a decline in the interest rate. II. The company has fixed its borrowing cost only for 50% of the exposure. The effective borrowing cost is computed as: r= 100- 97= 3% So, the company will borrow money at 3%. III. The company did not hedge all the risks involved by the transaction above. Firstly, it only hedged 50% of its interest rate exposure. Secondly, risks related to changes in the principal borrowed, or the currency in which this one is expressed are not hedged. Question 2 There are various theories related to dividend policies. ...Show more

Summary

Question1 2 Part 1 2 Part 2 2 Part 3 3 Question 2 4 Question 3 6 Question 4 9 Part B chosen 9 Reference List 12 Question1 Part 1 I. The company must choose the contract March 2013 in order to hedge its exposure. Usually, it is recommended that the hedge instrument to have a maturity greater with at least one month than the hedged asset…
Author : jaydelegros
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"The Theory and Practice of Investment Management"
with a personal 20% discount.
Grab the best paper

Related Essays

How much volatility is the Saudi Arabian petrochemical industry exposed to
The measure being used to estimate volatility is ‘beta’ whose reliability in examining historical volatility rates have been assessed and zeroed down upon in the literature review. The methodology aims at examining the degree of volatility in the market returns of the petrochemical industry.
84 pages (21000 words) Dissertation
Portfolio Theory and Investment Analysis
The benefit of the strategy adopted from 2007 onwards. The return on the three asset portfolio: rp = wara + wbrb + wc rc Whereby rp is the return. ra is the return and wa is the weight on asset a. rb is the return and wb is the weight on asset b. rc is the return and wc is the weight on asset c.
8 pages (2000 words) Term Paper
Taxation in Theory and Practice Assignment
People get taxed by the state in order to finance the revenue requirements. It is advisable for the Mayor of Spinney to adopt a tax system that is regressive. This is because in Spinney state, there is free movement of goods, services and people. Regressive tax system allows race heterogeneity and population mobility.
8 pages (2000 words) Essay
Advanced Accounting Theory & Practice
Advanced Accounting Theory & Practice Introduction International Accounting Standard (IAS) 1 provides a framework for the Preparation and Presentation of Financial Statements. This accounting standard is comprised of information necessary for preparing and presenting the financial statements.The basic purpose of this standard is to enable different users to make effective economic decisions with the use of financial and non-financial information.
10 pages (2500 words) Essay
Finance Principles
The main purpose of diversification of portfolio is to reduce the overall risk associated with the portfolio without compromising much on the return. It is the motive of every investor to maximize return and minimize risk. The volatility or risk associated with a portfolio is minimized due to diversification because of the fact that not all the assets included in the portfolio move along the same direction.
8 pages (2000 words) Essay
Risk Management and Investment (Portfolio E)
I opted to use the bottom up approach analysis which I felt would work best for this portfolio and came up with the following recommendations: To Reduce the cash weighting Remain invested in Equities. Reduce the number of sectors they have invested in and instead invest in more profitable ventures.
16 pages (4000 words) Essay
A review of academic research undertaken in relation to Small and Medium Sized Enterprises.
2. In 2008, the European Union implemented the Small Business Act for Europe 3. The same act contributed to the improvement of European Union small and medium enterprises. 4. The act increased innovative and creative competitiveness in the small and medium enterprise market.
10 pages (2500 words) Assignment
Investment and Portfolio Analysis
There was a significant year-over-year improvement for all automotive operations. Ford Motor Credit pre-tax profit of $112 million. Cost reductions of $600 million; $1.1 billion
8 pages (2000 words) Essay
Describe the perceived roles and involvements of management accounting in supporting the decision process within the Union Carbide Pesticide Plant prior to the disaster;
Bradford (1985) in his article, expresses the fact its effects were felt years later on. While the death toll was officially reported to have been 2,259, it’s the effect that it left on those who survived that was even more devastating. Bradford explains that for
4 pages (1000 words) Essay
Choose a topic
5.76 million people employed so payroll employment was down as well making the financial sector a major player impacting economy (Baily & Elliott, 2013). U.S. Financial market impacts the business as availability of credit is crucial for businesses to finance operations and
2 pages (500 words) Research Paper
Find out how much would it cost
to get a custom paper written by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT