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Consider a security that yields a positive payoff of $100 if the stock price at maturity is lower than or equal to $70 and a positive payoff of $50 if the stock price at maturity is between $70 and $80. If the stock price at maturity is larger than or equal to $80, the security has a payoff of zero. Assume that the initial stock price is $80, the maturity of the security is one year, and the stock volatility is 50% p/a. Assume that the stock price follows a lognormal distribution. Dividends and interest rates are assumed to be zero. Compute the price of this security. NO BLACK SCHOLES MODEL
The portfolio you manage is holding $5 million of treasury bonds with a 7% coupon rate and 5 years to maturity with a price of $98 (per $100 face value). To hedge the interest-rate risk on these bonds over the coming year, should you buy call or put ..
What fraction of the firm will the fund receive in exchange for its $11 million investment?
What is the difference in the effective interest rates of your existing and potential new accounts?
What should be the annual stated rate that SLB should offer its depositors?
Calculate the net profit or loss from BUYING a CALL option on Taz if at the time of expiration the price per share of Taz is $53.50.
You find a zero coupon bond with a par value of $10,000 and 20 years to maturity. If the yield to maturity on this bond is 5.2 percent, what is the price of the bond? Assume semiannual compounding periods.
The winner's prize money was $200. In 2015, the winner's check was $1,540,000. What was the annual percentage increase in the winner's check over this period?
The stock of Robotic Atlanta Inc. is trading at $ 35.34 per share. In the past, the firm has paid a constant dividend (i.e., g = 0) of $ 5.51 per share and it has just paid an annual dividend (i.e., DO = 5.51). Assuming that the discount rate remains..
The Aspen Corporation is expected to pay the following dividends over the next three years: $5, $3, $2. What is the stock price today?
Three general unsecured creditors are owed $45,000 as follows: Easy Does It Rentals, $15,000; Make Me a Deal Furniture, $5,000; and TV’s r Us, $25,000. After all other creditors are paid, the amount left for distribution to general unsecured creditor..
The real risk-free rate is 2.75%. Inflation is expected to be 2.25% this year and 4.5% during the next 2 years. What is the yield on 2-year Treasury securities?
You have just won the lottery. What is the present value of the cash flows from your lottery winnings?
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