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Consider a one-year futures contract for 1 share of a dividend paying stock. The current stock price is $50 and the risk-free interest rate is 10% p.a. It is also known that the stock will pay a $3 dividend at the end of year 1. The current settlement price for the futures contract is $51. Set up a strategy for an arbitrage profit. What are the initial and terminal cash flows from the strategy? Assume that investors can short-sell or buy the stock on margin and that they can borrow and lend at the risk-free rate. There are no margin requirements, transactions costs, or taxes.
Consider a stock that pays no dividends on which a futures contract, a call option and a put option trade. The maturity date for all three contracts is T, the exercise price of the put and the call are both X, and the futures price is F. Show that if X = F, then the call price equals the put price assuming that spot-futures parity and put-call parity conditions hold. Assume that interest is continuously compounded (i.e., use the spot-futures parity with continuously compounded interest).
A firm borrowed $1,500,000 from National Bank. The loan was made at a simple annual interest rate of 9% a year for 3 months. A 20% compensating balance requirement raised the effective interest rate.
Interest-on-Interest Consider a $2,900 deposit earning 10 percent interest per year for 9 years. How much total interest is earned on the original deposit (excluding interest earned on interest)?
The Stewart Company has $1,648,000 in current assets and $708,640 in current liabilities.
The moderate approach to current asset financing is the least profitable but the safest of all the three approaches.
How does the value change if the? market's required yield to maturity on a? comparable-risk bond? (i) decreases to 6 ?percent?
Using the following information on the tables in Business Math Handbook that accompanies the course textbook to answer the question. $140.10 per month cash price: $5,000 Down payment: $0 cash or trade months with bank-approved credit; amount financed..
Determining the best way to raise money to fund a? firm's long-minus term investments is called
You have been living in the house you bought 10 years ago for 100,000€. At that time, you took out a loan for 80% of the house at a fixed rate 15-year loan at an annual stated rate of 6%. which should be paid immediately. Should you refinance the rem..
Calculate the effect of points to be paid on a $200,000 loan at 8%, monthly payments with a 30 year term given the following scenarios: assuming 4 points and the loan is held to maturity.
What do you think are the main pros and cons of conservatism in financial accounting?
Four business associates create a business that will develop and sell information technology software. The business will be incorporated.
compute the following Degree of operating leverage, Degree of financial leverage, Degree of combined leverage.
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