American put option with a strike price

Assignment Help Financial Management
Reference no: EM131528744

A stock price is currently $40. Over every 3-month period the stock prices goes either up by 10% or down by 10%. The continuously compounded risk-free interest rate is 12% per year. Use a 2-step binomial tree to find the value of a 6-month American put option with a strike price of $45.

Reference no: EM131528744

Questions Cloud

How and what children learn through play : Identify the characteristics of the group so that your readers know who is being addressed. How and what children learn through play.
List and explain the six properties of idea money : Say the economy is in recession and you are the newly hired Federal director of fiscal policy. List and explain the six properties of idea money.
What categories do you find in the biblical texts : What categories do you find in the biblical texts, and what do these categories teach you about how illness is understood in this particular context?
Define the term serializability : Give both informal and formal definitions of the five lock types X. S, IX, IS, SIX. Note: The formal definitions are given by the compatibility matrix.
American put option with a strike price : find the value of a 6-month American put option with a strike price of $45.
Face value bonds outstanding-what is the yield to maturity : Company A has $1000 face value bonds outstanding. what is the yield to maturity?
Discuss the database design : Dan Tasker. Fourth Generation Data: A Guide to Data Analysis for New and Old Systems. Sydney, Australia: Prentice-Hall of Australia Pty., Ltd. (1989).
How is praise the same or different than feedback : What is the difference between effective praise and ineffective praise? How is praise the same or different than feedback?
What is the irr for project : Your firm is contemplating the purchase of a new $777,000 computer-based order entry system. what is the IRR for this project?

Reviews

Write a Review

Financial Management Questions & Answers

  The current rate be on three-year treasury securities

One-year Treasury bills currently earn 3.25 percent. You expected that one year from now, one-year Treasury bill rates will increase to 3.45 percent and that two years from now, one-year Treasury bill rates will increase to 3.95 percent. The liquidit..

  What is the present value of this stream of payments

A. Starting 5 years from now (end of year 5) you will receive $10,000. At the end of every odd numbered year ( 7, 9, …) following year 5 you will receive 5% more than the previous payment in perpetuity. The cost of capital is 10% (APR), what is the p..

  What is the beta of a security with an expected return

What is the beta of a security with an expected return of 12% if Treasury bills yield 6% and the market risk premium is 8%? Security XYZ has a beta of 1.1. The expected market rate of return is stable at 8% and the risk-free rate is 4%. If the realiz..

  When contrasting a finance based cash flow statement

When contrasting a Finance based cash flow statement to a GAAP based Statement of Cash Flow, which of the following statements is (are) true?

  Calculating the WACC for firm requires a number of inputs

Calculating the WACC for a firm requires number of inputs, many of which are estimates. which inputs do you believe are most likely to be estimated incorrectly

  Evaluate the impact of a major customer cancelling

Analyze the current financial state of Anthony's Orchard and evaluate the impact of a major customer cancelling their expected order and explain how purchase of the apple press might affect the company's revenue goals. Based on this information, ex..

  Estimate of cost of common equity

The future earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow 5% per year. Carpetto's common stock currently sells for $20.75 per share; its last dividend was $1.80; and it will pay a $1.89 dividend at the ..

  The term covered in covered interest arbitrage indicates

The term “covered” in covered interest arbitrage indicates that:

  Supervisors has agreed to fund an ambitious project

The Anderson County board of supervisors has agreed to fund an ambitious project that will "spend money now to save much more money in the future." A total of 16.2 million will be awarded to the York Corporation for energy improvements in 40 building..

  what is its WACC

A balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. The tax rate is 26.00%, rd =7.10%, rps = 6.20%, and rs = 15.60%. If the target capital structure of 31% debt, 9% preferred stock, and..

  Futures contracts generally trade on organized exchange

One advantage of forward contracts is that they are default free. Futures contracts generally trade on an organized exchange and are marked to market daily. Goods are never delivered under forward contracts but are almost always delivered under futur..

  Compounding with different interest rates

What would be the second year future value?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd