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You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1, 320,000 Over the past five years, the price of land in the area has increased 6 percent per year, with an annual standard deviation of 32 percent. A buyer has recently approached you and wants an option to buy the land in the next 12 months for $1, 470,000. The risk-free rate of interest is 4 percent per year, compounded continuously.
How much should you charge for the option? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Call price $
You find a zero coupon bond with a par value of $10,000 and 14 years to maturity. The yield to maturity on this bond is 5.1 percent. Assume semiannual compounding periods. What is the price of the bond?
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If the market rate on the CD falls to 6.25 percent, what is its current market value?
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In order to fund her retirement, Michele requires a portfolio with an expected return of 0.10 per year over the next 30 years. She has decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50 percent in Stock 2, and 25 percent in Stock..
Uptown construction is comparing two different capital structures. Plan i would result is 23,000 shares of stock and 320,000 in debt. Plan ii would result in 17000 shares of stock and 260,000 in debt.
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