Beruflich Dokumente
Kultur Dokumente
8
Question 5 (6 marks)
Use the following information for questions 1-6:
The following data are provided regarding each state and return.
State Probability Return
Strong 15% 20%
Weak 40% -6%
No change 45% 12%
4. Recession is an example of
a. Systematic risk
b. Systemic risk
c. Total risk
d. Unsystematic risk
8
Question 5 (6 marks)
Use the following information for questions 1-6:
An investor holds a portfolio of two shares. The correlation between the two shares is 0.70 and
their expected return, volatility and beta as follows:
Share Investment Expected return Volatility Beta
St. George Bank 30,000 20.00% 12.00% 0.90
Westpac Bank 10,000 26.00% 14.00% 1.40
2 = 12 12 + 22 22 + 21,2 1 2 1 2
2 = 75%2 12%2 + 25%2 14%2 + 2 0.7 75% 25% 12% 14%
2 = 1.37%
= 2
= 1.37% = 11.72%
8
Question 5 (6 marks)
Use the following information for questions 1-6:
Pioneer Limited, a gold manufacturer, goes long in a forward contract with an exercise price
of $500 per ounce for 1,000 ounces only to be exercised in 6 months.
1. Calculate the gain or loss if market gold price after 6 months is $600 per ounce.
() = ( )
() = (600 500) 1,000
() = $100,000
$100,000
2. Calculate the gain or loss if market gold price after 6 months is $450 per ounce.
() = ( )
() = (450 500) 1,000
() = $50,000
$50,000
3. Draw the long position in the forward contract based on the two scenarios.
8
Question 5 (6 marks)
Use the following information for questions 1-6:
Omega Limited, a gold producer, goes short in a forward contract with an exercise price of
$500 per ounce for 1,000 ounces only to be exercised in 6 months.
1. Calculate the gain or loss if market gold price after 6 months is $600 per ounce.
() = ( )
() = (500 600) 1,000
() = $100,000
$100,000
2. Calculate the gain or loss if market gold price after 6 months is $450 per ounce.
() = ( )
() = (500 450) 1,000
() = $50,000
$50,000
3. Draw the short position in the forward contract based on the two scenarios.