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A share of Amazon stock is currently selling for $1,405. You plan to purchase your first share in one year in honor of your 22nd birthday. You are concerned that the price will rise by then. To hedge this risk, you enter into a forward contract to buy one share of Amazon stock in one year. Assume that the risk-free rate is 3.5% (APR, semi-annual compounding).
• Calculate the appropriate price at which you can contract to buy the asset in one year. Assume continous compounding.
• Assume that eight months into the contract, interest rates increased by 75bp and the AMZN stock price is $1,400. Calculate your gain or loss from the forward contract. Assume continous compounding.
• Suppose that at expiration, the price of the stock is $1,500. Calculate your gain or loss from the forward contract.
Assume that investor has no transaction costs, and only pays a premium for any option purchased, and receives premium for any option written.
When the value of the euro changes
You just invested $3,000 in an opportunity which promises to pay six percent per year. How long will it be before you double your money?
Calculate the present value of total outflows. Should the old issue be refunded with new debt?
The Bradbury Breathe Easy Company needs to raise additional funds to build the new air purification systems factory. Their corporate bylaws suggest a mix of 50% debt, 5% preferred stock and 45% common stock. The company is in the 35% tax bracket. The..
Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1.25 coming 3 years from toda..
Your machine is wearing out, and generates less profit each year. what is the Present Value of the profits over the next 10 years.
Quantitative Problem: Adams Manufacturing Inc. buys $9.6 million of materials (net of discounts) on terms of 2/10, net 50; and it currently pays after 10 days and takes the discounts. Adams plans to expand, which will require additional financing. Wh..
Chris purchased an oil interest for $2 million. Recoverable barrels were estimated to be 500,000. During the year, 120,000 barrels were sold for $3.84 million, regular expenses (including cost recovery) were $1.24 million, and IDCs were $1 million. C..
Which of the following is not a factor that makes valuing a tartget's stock difficult and imprecise?
AMWT is permitted to manage biomedical materials that are to be discarded and that are infectious waste.
When preparing capital budgeting analysis for a new project, What is the NPV(in year 2009) of delaying the investment until 2010?
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