1. ] An investment bank has the following customers.

The investment bank takes the opposite position of the investors. The risk-free interest rate is R_F = 5% p.a. with continuous compounding. The current spot price of gold is HK$9800 per ounce. The volatility of gold is 12% p.a. The current spot price of a Bank of China share is HK$3.0. The volatility of Bank of China share is 15% p.a. Let P be the investment bank’s portfolio of gold and its derivatives.

1. Find the current value of P.
2. Find the delta of P. If the price of gold per ounce is increased by $1, what is the change of P predicted by delta?
3. Find the gamma of P. If the price of gold per ounce is increased by $1, what is the change of delta predicted by gamma?
4. How can the bank make its portfolio P delta-neutral using spot gold?
5. How can the bank make its portfolio P delta-neutral and gamma-neutral using spot gold and a traded call option with delta 0.2 and gamma 0.001?

To the Internal Revenue Service, the reasonableness of total itemized deductions depends on the taxpayer’s adjusted gross income. Large deductions, which include charity and medical deductions, are more reasonable for taxpayers with large adjusted gross incomes. If a taxpayer claims larger than average itemized deductions for a given level of income, the chances of an IRS audit are increased. Data (in thousands of dollars) on adjusted gross income and the average or reasonable amount of itemized deductions follow.

Use Excel - no hand calculations.

1. Write the regression equation.

2. Interpret the regression constant and regression coefficient.

3. Forecast a value for the dependent variable, test the significance of the regression coefficient at an alpha level of .05

4.Test the overall significance of the regression model, and Interpret the coefficient of determination.

The following table shows part of the probability distribution for the number of boats sold daily at Boats Unlimited. It is known that the average number of boats sold daily is 1.57. x f(x) 0 0.20 1 0.30 2 0.32 3 ? 4 0.05 5 ? Complete the distribution by computing the probabilities of selling 3 nd 5 boats per day.

All boats sell for $2000. What is the standard deviation of the daily revenue of the company?

Bluesteel is a SME that manufactures luxury goods for several well-known chain stores. In real terms, the company has experienced only a small growth in turnover in recent years, but it has managed to maintain a constant, if low, level of reported profits by careful control of costs. It has paid a constant nominal dividend for several years and its director has publicly stated that the primary objective of the company is to increase the wealth of shareholders. The capital structure of BlueSteel is as below £m Overdraft 1·0 10 year fixed interest bank loan 2·0 Share capital and reserves 4·5 ––– 7·5 ––– BlueSteel has the agreement of its existing shareholders to make a new issue of shares on the stock market but has been informed by its bank that current circumstances are unsuitable. The bank has advised that if new shares were to be issued now they would be significantly under-priced by the stock market, causing BlueSteel to issue many more shares than necessary in order to raise the amount of finance it requires. The bank recommends that the company waits for at least six months before issuing new shares, by which time it expects the stock market to have become strong-form efficient. Required: 3 Discuss the meaning and significance of the different forms of market efficiency (weak, semi-strong and strong) and comment on the recommendation of the bank that BlueSteel waits for six months before issuing new shares on the stock market.

An insurance company has commited to make a payment of $100,000 in 10 years. In order to fund this liability, the company has invested $27, 919.74 in a 5 year zero-coupon bond and $27,919.74 in a 15-year zero-coupon bond. The annual effective yield on all assets and liabilities is 6%. Determine whether the company's position is immunized.

Consider Ford Motor Company’s statement that appeared in its 2010 Annual Report:

The company’s four-point plan consists of: balancing our cost structure with our revenue and market share; accelerating development of new vehicles that customers want and value; financing our plan and rebuilding our balance sheet; and working together to leverage our resources around the world.

What are the implications of this strategy for financial management of Ford?

Discuss a recent sexual harassment claim in the news and whether media coverage is beneficial or detrimental to reporting and reducing sexual harassment claims in the workplace. Should sexual harassment claims be addressed publicly or handled privately?

A study investigated the relationship between audit delay (Delay), the length of time from a company's fiscal year-end to the date of the auditor's report, and variables that describe the client and the auditor. The independent variables are as follows.

Industry A dummy variable coded 1 if the firm was an industrial company or 0 if the firm was a bank, savings and loan, or insurance company.

Public A dummy variable coded 1 if the company was traded on an organized exchange or over the counter; otherwise coded 0.

Quality A measure of overall quality of internal controls, as judged by the auditor, on a five-point scale ranging from "virtually none" (1) to "excellent" (5).

Finished A measure ranging from 1 to 4, as judged by the auditor, where 1 indicates "all work performed subsequent to year-end" and 4 indicates "most work performed prior to year-end."

A sample of 40 companies provided the following data.

Enter negative values as negative, if necessary.

a. Develop the estimated regression equation using all four independent variables (to 3 decimals, if necessary). Delay = -------- + -------- Industry + ------- Public + ------- Quality + -----------Finished .

b. What is the value of the coefficient of determination (to 3 decimals)? Note: report R 2 between 0 and 1.

Did the estimated regression equation in part (a) provide a good fit?

c. Which of the following is a scatter diagram for showing Delay as a function of Finished? What does this scatter diagram indicate about the relationship between Delay and Finished?

The scatter diagram of Delay and Finishing suggests exists between these two variables. Add Finished-Squared as a fifth independent variable. Use best subsets regression procedure to answer the following question.

Which independent variables provide the best regression model if two independent variables are in the model?

Which independent variables provides the best regression model if three independent variables are in the model?

d. Using the best subset regression procedure, how many independent variables are in the highest adjusted R 2 model?

What is the value of R 2(adj) (to 1 decimal)? Note: report R 2(adj) as a percentage.

------------%

Melanie wants to add a direct quotation to her research paper about President Lincoln, from a book written by Joshua Wolf Shenk.  

Choose the correct way to cite the quotation in APA style.

• “Never had the conditions for a president-elect been so severe, and never had one seemed, by his credentials, so poorly prepared” (2005, Shenk, p. 172).

• “Never had the conditions for a president-elect been so severe, and never had one seemed, by his credentials, so poorly prepared” (Shenk, p. 172).

• “Never had the conditions for a president-elect been so severe, and never had one seemed, by his credentials, so poorly prepared” (Shenk, 2005, p. 172).

• “Never had the conditions for a president-elect been so severe, and never had one seemed, by his credentials, so poorly prepared” (Shenk, 2005).

In “Politics and the English Language,” George Orwell writes that every scrupulous writer should ask himself four questions about a piece of work.

Which question is NOT one of the four?

• How can I convince others to agree with me?

• What is my purpose?

• How can I best state my purpose?

• What image can best exemplify my purpose?

A company sells only one item with a marginal cost of $3 and there is a 50% probability of getting a high value customer who is willing to pay $8 and a 50% probability of getting a low value customer who is willing to pay $5. What is the expected profit? What about the expected profit if it was an auction? What about if it was an auction with three potential customers? What would be the important things to know to be able to compute the expected profit?