Calculate the value of the contract

Assignment Help Financial Management
Reference no: EM131241050

A call option provides a payoff at time T of max(ST - K, 0) yen, where ST is the dollar price of gold at time T and K is the strike price.

Assuming that the storage costs of gold are zero and defining other variables as necessary, calculate the value of the contract.

Reference no: EM131241050

Questions Cloud

Solid and liquid can only exchange heat : 2.0 kg of solid gold (Au) at an initial temperature of 1000K is allowed to exchange heat with 1.5 kg of liquid gold at an initial temperature at 1336K. The solid and liquid can only exchange heat with each other.
Economics of risk and uncertainty applied problems : Economics of Risk and Uncertainty Applied Problems Please complete the following two applied problems. Show all your calculations and explain your results. Problem 1: A generous university benefactor has agreed to donate a large amount of money for s..
What would he or she prepare for the criminal investigator : Discuss the role and responsibility of the first officer on the scene before the investigators arrive. What would he or she prepare for the criminal investigator?
Compute cosine and sine transforms cy and sy : Compute cosine and sine transforms, Cy and Sy, of the sample vector y of Section 10.2.1 and compare results with each other andy ? If E is an N×N matrix whose columns are orthonormal, then its rows are, too.
Calculate the value of the contract : Assuming that the storage costs of gold are zero and defining other variables as necessary, calculate the value of the contract.
How long will it take the bee to travel to the ?ower : A bee ?ies to a ?ower 548 m due south of its hive. The bee's speed in still air is 0.69 m/s, and there is a wind blowing toward the south at 0.19 m/s. How long will it take the bee to travel to the ?ower and back to the hive? Answer in units of s.
Capitalized equivalent cost of these infinite payments : Maintenance costs on a bridge are $5,000 every third year starting at the end of year 3. For analysis purposes, the bridge is assumed to have an infinite life. What is the Capitalized Equivalent (CE) cost of these infinite payments, assuming an annua..
Define q as the number of canadian dollars per us dollar : The dividend yield on the index is 3%. Define Q as the number of Canadian dollars per U.S dollar and S as the value of the index.
Can a car be going fast and speed up slowly : Compare "fast" to "speeding up quickly" and "slow" to "speeding up slowly." Can a car be going fast and speed up slowly? Can a car be going slow and speed up quickly? Explain.

Reviews

Write a Review

Financial Management Questions & Answers

  Cost of equity capital using geometric average growth rate

Suppose Stark Ltd. just issued a dividend of $2.24 per share on its common stock. The company paid dividends of $1.80, $1.98, $2.05, and $2.16 per share in the last four years. If the stock currently sells for $45, what is your best estimate of the c..

  Is a warrant more similar to a call option or a put option

Company Z issued bonds with detachable warrants several years ago.   Each warrant allows the holder to purchase one share of stock at $30 per share.    The stock has a beta of 1.3.  Calculate the exercise value of the warrants if the price of the und..

  What is this bonds time to maturity

Time to Maturity A bond issued by a corporation on September 1, 1989 is scheduled to mature on September 1, 2046. If today is September 2, 2009, what is this bond's time to maturity?

  Finished product that contains these production inputs

The ________ of a firm is the amount of time that elapses from the point when the firm inputs material and labor into the production process to the point when cash is collected from the sale of the finished product that contains these production inpu..

  What is your initial margin

You write 4 naked put option contracts. The option price is $5, the strike price is $42 and the stock price is $45. What is your initial margin?

  Cash flow effect from the change in net working capital

For project A, the cash flow effect from the change in net working capital is expected to be -300 dollars at time 2 and the level of net working capital is expected to be 1,600 dollars at time 2. What is the level of current liabilities for project A..

  Cost of debt-cost of equity and basic earning power

Iddle Publishing currently is financed with 10% debt and 90% equity. However, Biddle's CFO has proposed that the firm issue new long-term debt and repurchase some of the firm’s common stock. Cost of debt, Cost of equity, basic earning power, net inco..

  Specialized manufacturing corp

Manu Inc. ("Manu") is a specialized manufacturing corp that has been in business for 22 years. Walter and Jane Smith, husband and wife, founded the business and own 60 percent of Manu's outstanding common stock. Linda wants to know if she has any rig..

  What is likely to happen to swedish interest rate and why

Assume that the 1-year interest rate in the US is 2% and the 1-year interest rate in Sweden is 4%. You have no additional information on the spot or the forward rate. What is likely to happen to the USD / SKR spot rate and why? What is likely to happ..

  What percent of face value will you receive

A bond matures in 25 years, but is callable in 11 years at 123. The call premium decreases by 2 percent of par per year. If the bond is called in 16 years, what percent of face value will you receive? (

  Market value added

Hayes Corporation has $300 million worth of common equity on its balance sheet, and 6 million shares of stock outstanding. The company's Market Value Added (MVA) is $162 million. What is the company's stock price?

  Stock provides risk premium for exposure to market risk

The two-factor model on a stock provides a risk premium for exposure to market risk of 9%, a risk premium for exposure to interest rate risk of (-1.3%), and a risk-free rate of 3.5%. The beta for exposure to market risk is 1, and the beta for exposur..

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