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L15.2028 - Finance I (2025/2026)
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For questions 1 to 8, consider the following information:
You invest $150,000. You can invest in a risky asset (not the market portfolio) with an expected rate of return of 10,2% and a standard deviation of 18,4%, and a T-bill with a rate of return of 4%. The market portfolio has an expected return of 15% and a standard deviation of 14%. Assume the CAPM assumptions hold and that all securities are in equilibrium.
Compute the expected return of an equally weighted portfolio on the risky asset and the market portfolio.
(Insert your answer as a
percentage. For example, if your answer is 0.05815, please insert 5.815)
Find the price today of a European Call over stock with 3 months to maturity/expiration date and a strike price of €20,7.
(Insert your answer in
monetary units. For example, if your answer is €231.187, please insert 231.187)
For questions 5 to 7, consider the following information:
The current stock price of . The firm will pay a dividend per share equal to 10% of its stock price 9 months from now. Consider a risk-free rate APR (Annual Percentage Rate) of 13,8% quarterly compounded.
Find the risk-neutral probability of this firm’s stock moving up in the next quarter.
(Insert your answer as a
percentage. For example, if your answer is 0.673, you should insert 67.30)
Assume only for this question stock with 4 months to maturity/expiration date, and strike price of €20 is €10,3. Find the profit of an arbitrage strategy where you trade (buy or sell) one unit of a European Call over stock with 4 months to maturity/expiration date and a strike price of €20.
(Insert your answer in
monetary units. For example, if your answer is €231.187, please insert 231.187)
Consider only for this question that you just created a portfolio with the following components from the table above and the stock itself:
· 2×Short stock
· 1×Long Call (K=20)
· 4×Short Put (K=20)
· 3×Short Call (K=25)
NewGears’s stock price in 4 months is €17,9. Compute the payoff of this combination in 4 months.
(Insert your answer in monetary units. For example, if your answer is €231.187, please insert 231.187)
Find the no-arbitrage price of a European Put over NewGears’s stock with 4 months left to maturity/expiration date and a strike price of €20.
(Insert your answer in
monetary units. For example, if your answer is €231.187, please insert 231.187)
For questions 1 to 4 consider the following information:
You have information regarding several financial options for stock (all with
|
Strike (€)
|
Price (€)
|
European Call
|
20
|
4,6
|
European Put
|
20
|
?
|
European Call
|
25
|
3,2
|
The current stock price of stock is €18. The annual continuously compounded risk-free rate is 3,62%.
Assume only for this question stock, with a strike price of €25. Assume also that 4 months from now stock is worth €28,0. Compute your profit from this position.
(Insert your answer in
monetary units. For example, if your answer is €231.187, please insert 231.187)
Consider additionally that after a new shock, you observe the following information for the
|
Current Market Price (P
|
Investor’s Expected Price (P
|
Investor’s Expected DPS (DPS
|
Risky Asset
|
56,2
|
72,7
|
0
|
Compute the investor’s expected return for the risky asset.
(Insert your answer as a
percentage. For example, if your answer is 0.05815, please insert 5.815)
Compute the beta for a portfolio 24% invested in the risk-free asset and the remaining in the risky asset.
(Insert your answer in
units. For example, if your answer is 0.241, please insert 0.241)
For questions 1 to 8, consider the following information:
You invest $150,000. You can invest in a risky asset (not the market portfolio) with an expected rate of return of 10,9% and a standard deviation of 19,8%, and a T-bill with a rate of return of 4,7%. The market portfolio has an expected return of 15% and a standard deviation of 14%. Assume the CAPM assumptions hold and that all securities are in equilibrium.
Compute the expected return of an equally weighted portfolio on the risky asset and the market portfolio.
(Insert your answer as a
percentage. For example, if your answer is 0.05815, please insert 5.815)