Suppose That the Risk free Interest Rate is 10 Per Annum With Continuous
Problem 3 Suppose that the risk-free interest rate is 10% per annum with continuous compounding and that the dividend yield on a
stock index is 4% per annum. The index is standing at 400, and the futures price for a contract deliverable in four months is 405. What arbitrage opportunities does this create?
1 answer:
Answer:
Please see explanation
Explanation:
To answer the given question, first we will calculate the theoretical future price which shall be determined using continuous compounding formula as follows:
Theoretical future price=400*e^(10%-4%)*4/12
=$408.08
The actual future price of a contract deliverable in 4 months is only $405 which means that the index future price is too low in relation to the index.
The suitable arbitrage strategy shall be:
1. to purchase the future contracts
2.Short sale the shares which are underlying the index
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Explanation:
Answer:
(a) 75% (b) 25% (c) 2.25 customers (d) 12 minutes (e) 0.25 (f)0.237
Explanation:
Solution
Given that:
The Arrival rate at Poisson distribution = 15 per hour = λ
The Service rate at exponential distribution = 20 per hour = μ
(a) System utilization = λ/μ = 15 / 20 = 0.75 = 75%
(b) The Probability of zero requests in server = 1 - λ/μ = 1 - 0.75 = 0.25
or
The percentage of time server will be idle = 25%
(c)The expected number of customers waiting to be served = Average number of customers in line = λ^2/μ (μ-λ ) = 225 /20(20-15) = 45 /20 = 2.25
Therefore, it is expected that on an average, 2.25 customers are waiting in line to get served.
(d)The average time customers will spend in system = 1/(μ-λ )
=1/(20 - 15) = 1/5 hours = 12 minutes
(e)The probability of zero customer in system = 1 -λ/μ = 1 - 0.75 = 0.25
(f) The probability of more than 4 customers in the system = (λ/μ)^ 4+1
= (15/20)5 = 0.237
Answer:
d. all of the above
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Given that a master budget is a term that describes an extensive financial plan that covers all components of a business firm's actual plan in terms of finances.
Some of the components the master plan covers include production budget, capital expenditures budget, sales budget, budgeted financial statement, etc.
This master budget can be used by firms to formulate their goals.
Hence, in this case, the correct answer is "All of the above." Because it involves all the other options in the question. ( production budget, capital expenditures budget, sales budget)
Source: https://1answer.guru/questions/3689206-problem-3-suppose-that-the-risk-free-interest-rate-is-10-per.html
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