Michael Speranza
IE 420 2/4/2016
Homework #2
1. A FANG stock is representative stock for Facebook, Amazon, Netflix, and Alphabet, Inc. (one of
Googles subsidiaries). It represents some of the most popular technology stocks on the market
today as one group
http:/leopolds.com/resources/derivatives/
CHAPTER 1
Introduction
Practice Questions
Problem 1.1.
What is the difference between a long forward position and a short forward position?
When a trader enters into a long forward contract, she is agreeing to bu
1)
20% of 2B = 400,000,000
-2B + 400M(p/a, I, 10) = 0
=RATE(10,400M,-2B)
= 15.0984%
2) i* = 8% * (3/12) = 32%
3)
Descartes' rule of signs = total number of real i* values is < or = to number of sign changes in net cash
flow series
Date: Year 1: (+) 2: (-)
1)
The two criteria are the initial sign is negative and that the sign changes only once during the series of
cash flows.
2)
PW(0) = -400k 190K(P/F, 9%, 3) = -546,714.8612 $
FW(10) = 160K(F/A, 20%, 10) = 4,153,389.1379 $
-546714.8612(1+i')^10 + 4,153,389.
Michael Speranza
IE 420 4/14/2016
Homework 6
1. The expectation of a stock price after time t is given by S 0eT. Given that we know both the stock
price at time t=0 (on 1/1/2014) and the price after 2 years (on 12/31/2015), we can calculate , the
expected