Consider

now that you want to use the put-call parity to evaluate a 2-year European put

on stock A with a strike price of €35.

Stock A has a price of €33. Assume

that each semester the price of A price will increase by 20% or decrease by 30%.

Four quarters from now Firm A will pay a dividend equal to 10% of the stock

price at that time. Consider an APR of 6,1% semi-annually compounded.

Assume only for this question that the correlation between X and Y is -1. Consider that you want to create a portfolio that combines stocks X and Y and has zero volatility. Report the weight of stock Y.

(Report your answer as a percentage. For example, if your solution is 4.531% please insert 4.531.)

For questions 1 and 2 consider the following data:

You collected the following data regarding stocks X and Y:

Assume only for this question that the correlation between stocks X and Y is 0.3. Compute the expected return for the minimum variance portfolio with stocks X and Y.

Compute the portfolio’s standard deviation.

For question 1 and 2 consider the following data:

You own three stocks: 370 shares of stock A, 264 shares of stock B, and 454 shares of stock C. The current share prices and expected returns of A, B, and C are, respectively, €42,5, €39,4, €42,9 and 12%, 9,40%, 10.5%.

Below you have the covariance matrix for the tree stocks:

Compute the portfolio’s expected return.

Compute

the expected stock price cum-div one year from now (immediately before the dividend from that period is paid).

Compute

the expected stock price ex-div one year from now (without the dividend from

the respective period).

Suppose Firm A will pay a dividend of $4

per share at the end of this year and $5,4 per share the year after that. You

expect Firm A’s stock price to be $52 in two years, immediately after the

payment of that period’s dividend per share. Assume that Firm A’s equity cost

of capital is 8,5%.

What is

the expected capital gain between today and next year?

Consider

additionally that after a new shock, you observe the following information for

the

Compute the investor’s

expected return for the risky asset.