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
FALSE
If the same goal is achieved using index futures, then the transaction costs will be lower as compared to buying and selling invididual stocks.
#25
Equity premium = 8.29%
T-bill rate = 3%
The estimated expected return in 2011 = Equity premium + T bill rate
The estimated expected return in 2011 = 8.29% + 3%
The estimated expected return in 2011 = 11.29%
#26
TRUE
In the intermediate time, the cash flows of futures and forward contracts may be different, but the difference vanishes on the contract expiry
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