Econ322 Financial Markets And Risk Management

Econ322 Financial Markets And Risk Management

Econ322 Financial Markets And Risk Management

1. Suppose the price of CANNIBAL WEED (CW) Inc. closes at $69 on October 16,2018 after the announcement that an extraordinary dividend of $3 per share will bedistributed on October 17, 2018 before trading starts.

(a) Based on this information, what price would you expect the stock to trade at onOctober 17 after the dividend has been distributed?

(b) Based on your answer to part (a), what is the return for an investor that buys thestock just before the closing on October 16 and sells it again immediately aftertrading starts on October 17? Explain your answer.

(c) Suppose the opening price for the stock on October 17, the day cannabis has been legalized, is $64. What does this imply for the efficient market hypothesis?

An in-depth coverage of portfolio selection theory, performance evaluation and derivative pricing theory. Portfolio risk management and hedging are introduced. Discussions on widely used derivative products including futures and options. Students will be exposed to the most recent developments in financial markets.\

Students are strongly encouraged to attend lectures as some of the material and discussion
will go beyond the textbook of the course. The final grade in the course will be
determined based on homework assignments, a midterm and a final.

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