A tax swap involves swapping out of a

Consider the following two factor APT model   E(R) = l0 + l1b1 + l2b2

Stocks A, B, and C have two risk factors with the following beta coefficients. The zero-beta return (l0) = .025 and the risk premiums for the two factors are (l1) = .12 and (l2) = .10.   Stock Factor 1 bi1 Factor 2 bi2 A -0.25 1.1 B -0.05 0.9 C   0.01 0.06 Assume that stocks A, B, and C never pay dividends and stocks A, B, and C are currently trading at $10, $20, and $30, respectively. What is the expected price next year for each stock?

You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8 percent. You also have the following information about three stocks.       Current Expected Expected Stock Beta Price Price Dividend X 1.25 $20 $23 $1.25 Y [a] $[b] $[c] $[d] Z 0.90 $35 $38 $1.00 What is the estimate rate of return for stock Y? (Keep 4 decimal places)  

In your portfolio you have $1 million of 20 year, 8 5/8 percent bonds which are selling at  83 15/32 against this position. Because you feel interest rates will rise you sell 10 bond futures at 81 15/32 against this position. Two months later you decide to close your position. The bonds have fallen to 78 and the futures contracts are at 75 [a]/32. Disregarding margin and transaction costs, what is your gain or loss?

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)   XYZ CORP   Exercise NYSE   Date Price Price Close Calls OCT 85 16 3/4 101 11/16   OCT 90 12 101 11/16   OCT 95 7 5/8 101 11/16 Puts OCT 85 1/8 101 11/16   OCT 90 3/8 101 11/16   OCT 95 13/16 101 11/16     If you establish a long strip using the options with an 85 exercise price, what is your dollar gain or loss if at expiration XYZ is trading at [a] [b]/16? (Keep 2 decimal places)

What is the abnormal rate of return for Stock A when you consider its systematic risk measure (beta)? (Keep 3 decimal places) Stock Rit Rmt ai Beta A   [a] 10.0 0 [b] B 10.4   8.0 0 1.4   Rit = return for stock i during period t Rmt = return for the aggregate market during period t

A financial analyst covering Magnum Oil has determined the following four possible returns given four different states of the economy over the next period. Calculate the expected return for Magnum Oil. (Keep 4 decimal places) Probability Return 0.10 [a] 0.25 [b] 0.40 [c] 0.25 [d]

You are trying to decide between a par value corporate bond carrying a coupon rate of 6.25% per year and a par value municipal bond that pays an annual coupon rate of 4.75%. Assuming all other factors are the same and you are in the 28% tax bracket, which bond should you choose and why?

Discuss the ethical implications of the two-way symmetrical model. Do you think it is realistic for practitioners to serve multiple stakeholders with conflicting needs? Provide reasoning.