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1. Compute the price of an American call option with strike K=110 and maturity T=.25 years.
2. Is it ever optimal to early exercise the put option of Question 2?
3. If your answer to Question 3 is "Yes", when is the earliest period at which it might be optimal to early exercise? (If your answer to Question 3 is "No", then you should submit an answer of 15 since exercising after 15 periods is not an early exercise.)
4. Do the call and put option prices of Questions 1 and 2 satisfy put-call parity? Yes or No
The fully-indexed rate on a 5/1 ARM with a maturity of 30 years is determined by the yield on the one-year LIBOR plus a margin of 250 basis points. If the fully-indexed (composite) rate is currently 6%, what is the current yield on the one-year LIBOR..
Evaluate the costing process and procedures of the organisation with respect to method or approach utilised - capital decision making process within the organisation with regards to what methods are utilised, how such methods are chosen, how project..
Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $15 million, of which 80% has been depreciated. The used equipment can be sold today for $3.75 million, and its tax rate is 30%. What is the equipment..
The cost of capital is the same as the cost of equity for firms that are financed:
Why does a bankrupt firm under Chapter 11 generally require its bondholders to convert their debt to equity of the company after the reorganization?
Taylor and Jordan are married and file a joint tax return claiming their two children, ages 12 and 9 as dependents. Their AGI for 2014 is $100,000. Taylor and Jordan's child tax credit for 2014 is:
There are 25 students in a class. B4 contains the number of female students and B5 contains the number of male students. Which of the following IF functions will the place the larger number (males or females) in the current cell? Assume that B4 and B..
We have the Fitzpatrick bond which has a convexity of 30, duration of 4, a ytm of 12% and a maturity of 25 years. The central bank is injecting huge liquidity and there is no fear of inflation. If the yields alter by 100 basis points, what would the ..
Defines how solvency and liquidity differ and provides an example of two companies. As a financial manager, what can you do to make sure your company stays solvent and is not too liquid?
Discuss present value and future value annuities and annuity dues. What is the timing of cash flows? What are their differences? What are the advantages of both? How are they used by financial management?
Lithium, Inc. is considering two mutually exclusive projects, A and B. Project A costs $95,000 and is expected to generate $65,000 in year one and $75,000 in year two. Project B costs $120,000 and is expected to generate $64,000 in year one, $67,000 ..
George and Barbara will be retiring in four years and would like to buy a lake house. They estimate that they will need $150,000 at the end of four years to buy this house. They want to make four equal annual payments into an account at the end of ea..
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