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Q2. A stock price is currently $100. Over each of the next three six-month periods, it is expected to go up by 8% or down by 8%. The risk-free interest rate is 2% per annum. a. What is dt, the length of one period?b. What is u, the up factor? Note that the answer is not 10%.c. What is d, the down factor?d. Calculate p, the risk-neutral probability that the stock price will go up next period.Hint: End of chapter 12, Q5For Q3 and Q4, use the following information.A non-dividend paying stock is currently trading at $100 and its volatility is 40%. Consider a put option on this stock, with a strike price of $110, expiring in 1.5 years. The current risk-free rate is 2% per annum. We will price the put option with a 3-step binomial tree (the number of steps = 3). Q3. First, calculate the European put option price in a spreadsheet. Then use Derivagem to price it. Confirm these 2 prices match. Include the Derivagem output (screenshot or copy paste).Q4. Calculate the American put option price in a spreadsheet. Then use Derivagem to price it and confirm. These 2 prices must match but will be higher than Q3 answer. Include the Derivagem output.
Paula took out a 25-year mortgage for $130,000 for her home at an annual interest rate of 8%. She decided to refinance after 5 years. Find the unpaid balance of the loan. (Do not round until the final answer. Then, round to the nearest cent.)
Then on December 1, 2013, you sold the bond when the market rate of interest was 6.0%. What's the total dollar return and the percentage return on your initial investment?
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What is the value of a put option written on the stock with the same strike price and expiration date as the call option?
The following table describes the past two years of quarterly sales information. Suppose that there're both trend and seasonal factors and that the seasonal cycle is one year. Use time series decomposition to forecast quarterly sales for the next ..
How did mortgage-backed securities contribute to the subprime mortgage crisis that has been experienced recently
problem iabc company stock has a required return of 12 and the stock sells for 40 per share. the firm just paid a
An investor has a $10,000 portfolio that allocated as given: short 100 shares of stock A, purchase 250 shares of B and 200 shares of 3. Any additional funds are lent at risk free rate of 0.04.
Assume that management believes probability of weak demand in 2012 is 25 percent and the probability of strong demand is 75%.
a bank with deposits of 500 million has 75 million in cash on hand 50 million in deposits with the fed and 80 million
He then formed a corporation and invested $400,000 in setting up a production plant. If the professor's belief is correct, what are the book and market values of the firm?
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