Compute the price of a derivative whose payoff

Assignment Help Financial Management
Reference no: EM131065194

The current spot price of a stock is $21, the expected rate of return of the stock is 11%, and the volatility is 12%. The risk-free rate is 5%. Compute the price of a derivative whose payoff in 5 months is ln(S5/12) + 32, where S5/12 is the stock price in 5 months.

Reference no: EM131065194

Questions Cloud

What required rate of return is implied by the current : Losh Key Corporation common stock is selling for $25.00 per share with an expect cash dividend next year of $1.00. Short term prospects are excellent for Losh Key: a 25% annual growth rate in dividend payments is expected for the three years followin..
Size of firm has no effect on tendency to pay dividends : Generally speaking, the size of a firm has no effect on its tendency to pay dividends. The market crash and the accounting scandals in the early 2000s tended to cause financially stable firms to cease paying cash dividends. The majority of firms eith..
Distinction between substitution and income effects : A friend says that the tax "generates no excess burden because it does not lead to changes in behaviour." Is this statement true or false? Explain using a simple labour-leisure choice model, and do not forget to make the distinction between substi..
Develop a comprehensive alternative plan : Prepare a complete and comprehensive report for Joe to use for his two o'clock meeting. This should include both the analysis of what went wrong and why, as well as a comprehensive and time-phased plan to implement lean production the correct way...
Compute the price of a derivative whose payoff : The current spot price of a stock is $21, the expected rate of return of the stock is 11%, and the volatility is 12%. The risk-free rate is 5%. Compute the price of a derivative whose payoff in 5 months is ln(S5/12) + 32, where S5/12 is the stock pri..
Studied-learned about u.s. history over the course : For this discussion, I'd like everyone to reflect upon what you have studied/learned about U.S. history over the course of this semester, and discuss this with your fellow students in response to the following statement.
Describe a process you could use to get simple random sample : Is your sample a simple random sample? Explain. Describe a process you could use to get a simple random sample of size 20 from a class of size 40
Firm is expected to have net capital expenditures : Randall and Arts Inc. has an expected net operating profit after taxes, EBIT(1-T), of $3,200 million in the coming year. In addition, the firm is expected to have net capital expenditures of $480 million, and net operating working capital (NOWC) is e..
Reviewing the various theories of emotion : 1-Why do you believe the US has such a significantly higher rate of teen pregancies compared to comparable industrialized nations? What interventions do you believe would be effective in addressing this issue? In preparing your answer, make sur..

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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