Question

please answer all 3!!

QUESTION 31 A 529 plan is: A defined contribution retirement plan offered by not for proftinstitutions "A type of retirement plan that individuals can make use of, regardless of whether they are covered by a retirement plan at work." The savings account component in a Health Savings Account An account that allows you to purchase life insurance with before tax dollars. Atax sheltered savings account for higher education expenses QUESTION 32 Vulcan Vateral stock has a beta of the current free rate is 2.7% and the market risk premium is 5.3.then according to the Capital Asset Pricing Model what should be the required rate of retum report as raw numit if your answer is 7.25 plugin 7.25) QUESTION 33 Match each term • lont position in a call option • Short position in a call option Lont position in a put option Short position in a put option Swap Long position in altures contract • Short position in a futures contract A Required to purchase the underlying asset at maturity B. Has the right but not the obligation to sell whatever is the underlying asset Has the right but not the obligation to purchase whatever is the underlying asset D. Must purchase the underlying still the other side wants to execute the deal. Alternatively, the deal can expire unused the other side does not want to execute it Two counterparties exchange a set of quarterly interest rate or exchange rate payments for several years F. Required to sell the underlying asset at maturity G. Must sel the underlying as if the other side of the deal wants to execute Alternativey, the dealcon expressed the other side does not want to execute

Answer 1

Q31: A 529 plan is a tax sheltered savings account for higher eductaion expenses

Q32: According to capm

Required rate= Risk free rate + (Beta * Market risk premium)

= 2.7% + (.8 * 2.7%) = 6.94%

Q33: Long position in call option : C

Short position in a call option: G

Long position in put option: B

Short position in put option: D

Swap: E

Long position in futures contract: A

Short position in futures contract: F