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A bank has written a call option on one stock and a put option on another stock. For the first option the stock price is 50, the strike price is 51, the volatility is 28% per annum, and the time to maturity is 9 months. For the second option the stock price is 20, the strike price is 19, the volatility is 25% per annum, and the time to maturity is 1 year. Neither stock pays a dividend, the risk-free rate is 6% per annum, and the correlation between stock price returns is 0.4. Calculate a 10-day 99% VaR:
a) Using only deltas
(b) Using the partial simulation approach
(c) Using the full simulation approach.
Werth Company produces tie racks. The estimated fixed costs for the year are $288,000, and the estimated variable costs per unit are $14. Werth expects to produce and sell 60,000 units at a price of $20 per unit.
Eva received $60,000 in compensation payments from JAZZ Corp. during 2013. Eva incurred $5,000 in business expenses relating to her work for JAZZ Corp. JAZZ did not reimburse Eva for any of these expenses.
Consider a three-year project with the following information: initial fixed asset investment = $870,000; straight-line depreciation to zero over the five-year life; zero salvage value; price = $34.05; variable costs = $22.55;
Bangor Company makes products C and D. Information for overhead costs and for the two products appears below. The company makes 50,000 units of product C each year and 20,000 units of product D.
The issue will pay a $19 annual dividend in perpetuity, beginning 11 years from now. If the market requires a 12 percent return on this investment, how much does a share of preferred stock cost today
Briarcrest Condiments is a spice-making firm. Recently, it developed a new process for producing spices. The process requires new machinery that would cost $2,224,349.
Allie Dawson is trying to decide whether or not she can afford the monthly payment of a loan to purchase a new car. The car costs $19,600. She is considering a 5-year loan at 6% interest.
McDermott estimates that the new project will generate $900,000 in annual sales at the end of each of the next four years and that operating costs (excluding depreciation) will equal $400,000.
a) 12% nominal rate, semiannual compounding, discounted back 5 years b. 12% nominal rate, quarterly compounding, discounted back 5 years
Keller currently sells for $48.00 a share, and its dividend is expected to grow at some constant rate g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years
You're prepared to make monthly payments of $380, beginning at the end of this month, into an account that pays 7.9 percent interest compounded monthly.
Show that Lagrangean duality reduces to linear programming duality when g(x) = Ax-b and S = {x | x ≥ 0}.
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