d. What is the rate of return on your marginedposition (assuming again that you invest$15,000 of your own money) if Xtel is sellingafter 1 year at: (i) $83.62; (ii) $74; (iii) $64.38?What is the relationship between yourpercentage return and the percentagechange in the price of Xtel? Assume that Xtelpays no dividends. (Negative values should beindicated by a minus sign. Round youranswers to 2 decimal places.)Rate of return for ear.i.) ?ii.) ?iii.) -22.51

Part (1) Selling Price = $83.62 Part (2) Selling Price = $74 Part (3) Selling Price = $64.38

Answered: d. What is the rate of return on your…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The following payoffs are observed in frictionless markets: Dividend next period Price next period Price today Asset 1 9 138 P1 Asset 2 9 75 80 A. In the absence of arbitrage opportunities, p₁= 127. B. In the absence of arbitrage opportunities, p₁= 140. C. In the absence of arbitrage opportunities, p₁= 142. D. If arbitrage opportunities are absent, the rate of return on asset 1 equals 9%. E. None of the above.
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Suppose that you have the following utility function: U=E(r) – ½ Aσ2 and A=3 Suppose that you have $10 million to invest for one year and you want to invest that money into ETFs tracking the S&P 500 (US) and S&P/TSX 60 (Canada) index, which are often used as proxies for the US and Canadian stock markets, respectively, and the Canadian one-year T-bill. Assume that the interest rate of the one-year T-bill is 0.35% per annum. You have found two ETFs that you are interested in. From a set of their historical data between 2001 and 2019, you have estimated the annual expected returns, standard deviations, and covariance as follows: ETFUS : E(r)= 0.070584 0.173687 ETFCDA : E(r)= 0.073763 0.16816 Covariance between ETFUS and ETFCDA = 0.02397 Answer the following questions using Excel: Draw the opportunity set offered by these two securities (with increments of 0.01 in weight). Hint: In Excel, calculate the portfolio expected return and…

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