Your video-game addicted nephew tells you that the Nintendo Wii is much better than the Microsoft X-Box.
To take advantage of this information, you decide to build a two asset portfolio by buying shares in Nintendo and selling shares short in Microsoft. For your long position you buy 1700 shares of Nintendo at a price of 40 per share. For the short position, you sell 1000 shares in Microsoft at a price of 35 per share. What is the portfolio weight for your short position in Microsoft?
A) -1.06
B) -0.94
C) 0
D) 0.34
E) 0.50
Question 2
MacroMedia Inc. 1,000 par value bonds are selling for 1,265. Which of the following statements is TRUE?
A) The bond market currently requires a rate (yield) less than the coupon rate.
B) The bonds are selling at a premium to the par value.
C) The coupon rate is greater than the yield to maturity.
D) All of the above are true.