An American investor wants to invest in a diversified portfolio of Japanese stocks but can invest...
An American investor wants to invest in a diversified portfolio of Japanese stocks but can invest only a rather small sum. The investor also worries about fiscal and transaction cost considerations. Why would futures contracts on the Nikkei index be an attractive alternative?
Homework Answers
Following are the most important benefits of investing through Nikkei Index :-
Diversification: Nikkei index is a stock market index for the Tokyo Stock Exchange (TSE), which measures the performance of 225 large, publicly owned companies in Japan from a wide array of industry sectors. Hence, investment through Nikkei Index offers the benefit of diversification.
Ticket Size of the Portfolio: In case of Futures contract, Investors are only required to keep a margin of the total value of the futures contract with the broker. Compared to this, buying Stocks in Cash Market will require Investor to pay entire value of the Stock purchased. Hence, Futures Contract allow an investor to take leverage and invest a smaller amount as compared to buying stocks.
Transaction cost: Transaction cost of buying a futures contract is smaller as compared to purchasing stocks from cash market. Hence, this is also one of the major benefits of investing through Nikkei Index.
Add Answer to:
An American investor wants to invest in a diversified portfolio
of Japanese stocks but can invest...
A manager wants to increase exposure of his/her stock portfolio. He/she can do so by buying...
A manager wants to increase exposure of his/her stock portfolio.
He/she can do so by buying high beta stocks and selling low beta
stocks. The transaction costs involved will be higher if the
manager achieves the same goal by purchasing stock index futures.
True or false?
If you can PLEASE help me out with #25 and #26 as well. Thank
you in advance!
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QUESTION 18 Which of the following statements is CORRECT? 1. An investor can eliminate virtually all...
QUESTION 18
Which of the following statements is CORRECT?
1.
An investor can eliminate virtually all diversifiable risk if
he or she holds a very large, well-diversified portfolio of
stocks.
2.
Once a portfolio has about 40 stocks, adding additional stocks
will not reduce its risk by even a small amount.
3.
It is impossible to have a situation where the market risk of
a single stock is less than that of a portfolio that includes the
stock.
4.
An...
help pls Questions 21-27 are based on the following information. CAPM and stock valuation. Your aunt, Beth, plan...
help pls
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A manager wants to increase exposure of his/her stock portfolio.
He/she can do so by buying high beta stocks and selling low beta
stocks. The transaction costs involved will be higher if the
manager achieves the same goal by purchasing stock index futures.
True or false?
If you can PLEASE help me out with #25 and #26 as well. Thank
you in advance!
QUESTION 24 A manager wants to increase exposure of his/her stock portfolio. He/she can do so by...
2. Portfolio expected return and risk A collection of financial assets and securities is referred to as a portfolio. Most individuals and institutions invest in a portfolio, making portfolio risk analysis an integral part of the field of finance. Just like stand-alone assets and securities, portfolios are also exposed to risk. Portfolio risk refers to the possibility that an investment portfollo will not generate the investor's expected rate of return Analyzing portfolio risk and return involves the understanding of expected...
4. Portfolio expected return and risk Aa Aa E A collection of financial assets and securities is referred to as a portfolio. Most individuals and institutions invest in a portfolio, making portfolio risk analysis an integral part of the field of finance. Just like stand-alone assets and securities, portfolios are also exposed to risk. Portfolio risk refers to the possibility that an investment portfolio will not generate the investor's expected rate of return. Analyzing portfolio risk and return involves the...
QUESTION 18
Which of the following statements is CORRECT?
1.
An investor can eliminate virtually all diversifiable risk if
he or she holds a very large, well-diversified portfolio of
stocks.
2.
Once a portfolio has about 40 stocks, adding additional stocks
will not reduce its risk by even a small amount.
3.
It is impossible to have a situation where the market risk of
a single stock is less than that of a portfolio that includes the
stock.
4.
An...
help pls
Questions 21-27 are based on the following information. CAPM and stock valuation. Your aunt, Beth, plans to invest in the common stock of Smart-investment Corporation Knowing that you are studying finance, she asks for your suggestion. You calculation shows that yield on Treasury securities is 6%. You know that the S&P 500 Index's expected annual return is 14% Your coonometric model tells you that beta of this company's stock is 1.25. Aunt Beth tells you that this company...
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