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A stock index with a dividend yield of 2.2 per annum with continuous compounding is currently standing at 1200.6 and has a volatility of 20 per annum. The riskOfree interest rate is 3.5 per annum with continuous compounding. Use a fourOstep binomial tree to calculate the price of
(a) a six month long forward contract on the index, with delivery price of 1200. Calculate the theoretical value of the forward contract. Compare and comment.
(b) a European six- month CALL option with a strike of 1200. Calculate also the value of the option by using the BlackOScholes formula. Compare and comment.
(c) an American six- month CALL option with a strike of 1200. (d) a down and out barrier CALL option with a strike of 1200 and knockout barrier of 1150 maturing in 6 months. A downOandOout call option gives the holder the right to buy the underlying asset at the strike price on the expiration date so long as the price of that asset did not go below a pre-determined barrier during the option's lifetime. When the price of the underlying asset falls below the barrier, the option is "knockedOout" and no longer carries any value.
indirect effects on project cash flow1. nbspprovide an example of a sunk cost from your firm.2. nbspprovide an example
The new copier will allow FA to increase revenues by $2,000 each year but expenses will also increase by $500 each year. Account receivables will increase by $500 and account payables will increase by $800 if the copier is purchased.
Draw a clear completely labeled cash flow diagram of the entire bond transcation using dollar accounts where they are are known and $X to represent the bond's face value.
What can be said about first-order autocorrelation given the Durbin-Watson value of 1.8911 calculated from the three factor model residuals?
The exchange rate between the US dollar and the Swiss Franc is SF1.3=$1, and the exchange rate betweent he dollar and the British pound is BP1=$1.40. What is the cross rate between francs and pounds.
you are interested in proposing a new venture to the management of your company. pertinent financial information is
assuming interest rates are 5 for aaa rated corporate bonds calculate the value of your bond relative to this interest
What is the maximum car payment and mortgage payment you can afford with the following conditions: your monthly household income, 10% for the car payment, and 28% for the mortgage payments?
1. a competitive hospital maintains current equipment and purchases new in order to stay current with the latest
Write a short essay of 350-400 words for each of the following questions. Where possible, illustrate with an appropriate example in your answer. You must support your discussion with appropriate references.
question 1the underlier is trading at a spot price of 100. the ten year riskless interest rate is trading at 10 p.a.
What is the value of this periodic deposit? Give a detailed explanation on your calculations and what is the sum of their present values? Give a detailed explanation on your calculations.
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