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You are attempting to value a call option with an exercise price of $125 and one year to expiration. The underlying stock pays no dividends, its current price is $125, and you believe it has a 50% chance of increasing to $160 and a 50% chance of decreasing to $90. The risk-free rate of interest is 7%. Based upon your assumptions, calculate your estimate of the the call option's value using the two-state stock price model. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of the call $
We are evaluating a project that costs $848,000, has an eight-year life, and has no salvage value. Calculate the best-case and worst-case.
A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per share and sells for $56. What is the total rate of return on the stock? What are the dividend yield and percentage capital gain?
Gerry pays S W to buy a ten-year annuity with end-of-year payments of $1, 400. This purchase price allows her to replace her capital by means of a savings account that has an annual effective interest rate of 3% and also to earn an overall annual yie..
What is the price of a U.S. Treasury bill with 68 days to maturity quoted at a discount yield of 2.05 percent?
Night Shades, Inc. ( NSI), manufactures biotech sunglasses. The variable materials cost is $ 10.48 per unit, and the variable labor cost is $ 6.89 per unit. a. What is the variable cost per unit? What are the total costs for the year? c. If the selli..
Calculate the current return on a stock of your choice and compare it to returns on bonds. Which is better to invest in presently a stock or a bond in this company and why? Please explain
The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a consent rate of 4 percent per share indefinitely. If investors require a rate of return of 10.5 percent on The Jackson-T..
____ are insurance against the costs associated with deposit outflows.
In mid-2012, Abercrombie & Fitch (ANF) had book equity of $1693 million, a price per share of $35.48, and 82.55 million shares outstanding. At the same time, The Gap (GPS) had a book equity of $3017, a share price of $27.90, and 489.22 million shares..
Consider a three-period ( t = 0,1, 2, 3 ) binomial option pricing model. There are 3-period put options on the stock. The values of the underlying variables are S = $50, n = 3, K = $48, u =1.1, d = 0.9, r =1.02 (a) what is the risk-neutral probabilit..
You are considering buying a house for $200,000. You have $40,000 in your bank account which pays 1% APR compounded monthly. If you contribute 10% of the price of the house as a down payment, the terms of your mortgage will be an original balance of ..
On January 8, 2016, a bank wants to lock in the 3-month interest rate starting on June 20, 2017. Currently, 6/2017 Eurodollar futures price is 94.93 and 9/2017 Eudollar futures price is 97.55. What is the interest rate that the bank can lock in? (Mar..
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