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Questions: 1. A portfolio is currently worth $10 million and has a beta of 1.0. An index is currently standing at 800. Explain how a put option on the index with a strike of 700 can be used to provide portfolio insurance.
2. Calculate the value of a three-month at-the-money European call option on a stock index when the index is at 250, the risk-free interest rate is 10% per annum, the volatility of the index is 18% per annum, and the dividend yield on the index is 3% per annum.
The firms marginal tax rate is 40%. What will the cash flows for this project be during year 3?
What is the present value of $1,050 payments received at the beginning of each year for the next 10 years? Assume an interest rate of 6.2%.
compute the cost of capital for the firm for the following.a currently bonds with a similar credit rating and maturity
Determine the net proceeds of each bond and the cost of the bonds for each company in terms of yield. The bond yield in the table is the market yield before the commission is charged.
A gasoline mini-mart orders 25 copies of a monthly magazine. Depending on the cover story, demand for the magazine varies. The gasoline mini-mart purchases the magazines for $1.50 and sells them for $4.00.
What is the total aftertax cash flow to shareholders if the company invests in T-bills? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.
Describe the relationship between cash and cash flows. Describe relationship between profit and cash flows. How do business decisions affect cash flows?
How would your answer to Part a change if Tish's business taxable income (before the Sec 179 expense and 50% of SE tax deduction) were $145,000 in 2012 instead of $69,000?
Discuss the probability versus risk trade-offs associated with alternative combinations of short-term and long-term debt used in financing a company's assets.
expected returnsstocks x and y have the following probability distributions of expected future returnsprobability x
Billions of dollars are paid to financial advisors each year to earn a return that is superior to what an individual could earn on his or her own. John Bogle started the Vanguard company and the first index mutual fund.
The risk-free rate of interest is 5 percent per year, compounded continuously. How much should you charge for the option?
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