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A futures price is currently $60 and its volatility is 30% per year. The continuously compounded risk-free interest rate is 8% per year. Use a one-step binomial tree to calculate the value of a 3-month European call option on the futures with a strike price of 60. Show your tree and calculations.
Suppose you have a portfolio consists of stock A and stock B. The total value of your portfolio is $150,000. Out of the total value $97,500 was invested in stock B and the rest in stock A. Calculate the Expected Return of your portfolio.
You need to create a portfolio with duration of 8 years. You can use a 5 year zero-coupon bond and a perpetuity which pays $100 each and every year forever and has yield of 10%. How much of the portfolio value in percentage you would have to invest i..
The correct method to handle overhead costs in capital budgeting is to:
Your new born child will be starting college in 18 years. You expect your child's college education to cost $24,930 per year, due at the beginning of each year. How much must you set aside at the end of each year for your child to attend four years o..
Which of the following statements is NOT a disadvantage of the regular payback method?
Estes Park Corp. pays a constant $8.45 dividend on its stock. The company will maintain this dividend for the next 15 years and will then cease paying dividends forever. If the required return on this stock is 13 percent, what is the current share pr..
Project Selection Midwest Water Works estimates that its WACC is 10.5%. The company is considering the following capital budgeting projects: Project Size Rate of Return A $1 million 12.0% B 2 million 11.5 C 2 million 11.2 D 2 million 11.0 E 1 million..
Adds. Inc., is considering a project that will result in initial after-tax cash savings o million at the end of the first year, and these savings will grow at a rate of 4% per year indefinitely. The find has a target debt-equity ratio of 0.7. a cost ..
Suppose you bought a bond with a coupon rate of 8.9 percent one year ago for $912. The bond sells for $956 today. Required: (a) Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? What was your total..
Average daily remittances are $5 million, and "extended disbursement float" adds 3 days to the disbursement schedule, how much should the firm be willing to pay for a cash management system if the firm earns 10% on excess funds
Susan is starting to plan for retirement. She has opened a bank account that pays 6% effective annual rate. She has two retirement goals that she would like to save for. Her first goal is to have enough money in her bank account to fund her retiremen..
q1vodafone group plc is a british multinationalwhich is one of the worlds largest mobile telecommunications
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