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A 6-month forward start option will, 6-months from today, provide its owner a 6-month European call on the non-dividend paying stock ? with strike equal to 95% of the stock price at that time. The volatility of ? is .3, and the continuously compounded risk free interest rate is 4%. The current price of ? is $80.00 per share.
(a) Determine the price of a prepaid forward for delivery of 1-share of ? in 6 months.
(b) The price of the forward start option is DS(1/2) for some number D, where S(1/2) is the cost per share of ? in 6 months. Determine the value of D assuming Black-Scholes.
(c) Determine the price today of the forward start option assuming Black-Scholes.
An investor, purchases a six-month (182-day) T-bill with a $10,000 par value for $9,700. If the Treasury bill is held to maturity, the annualized yield is ____%
Financial analysts forecast Limited Brands (LTD) growth rate for the future to be 12.5 percent. LTD’s recent dividend was $0.95.
Slow Ride Corp. is evaluating a project with the following cash flows: Year Cash Flow 0 –$ 29,100 1 11,300 2 14,000 3 15,900 4 13,000 5 – 9,500 The company uses an interest rate of 8 percent on all of its projects. Calculate the MIRR of the project u..
Construct Stephenson's market value balance sheet before it announces the purchase. Suppose Stephenson decides to issue debt to finance the purchase.
QWERTY Logistics announced that they will pay a dividend of $10. Their stock is currently trading at a price of $110. There are no taxes and capital markets are perfect. Hans-Eberhard prefers a $20 dividend. He currently owns 100 shares. What should ..
Annuity due. Reginald is about to lease an apartment for 18 months. The landlord wants him to make the lease payments at the start of the month. The monthly payments are ?$1,300 per month. The landlord says he will allow Reg to prepay the rent for th..
Use the qualitative information provided in the background and quantitative results calculated to answer the following questions:- Is either option financially feasible and Which is the more attractive option, and why?
Kenzie Cos. is expected to pay a dividend of $2.45 per year indefinitely. What will be the expected maximum price in light of the dividend payment logistics
Discuss intellectual property and major issues it has on international trade negotiations. discuss potential comparability problems that exist in ratio analysis
Explain the computational steps of a Net Present Value (NPV) calculation. What kind of information does NPV give a management team of a business and what kind of decision is made by management when it considers a project's NPV.
Fluffy purchased a lot 6 years ago at a cost of $402,000. Today, that a lot has market value of $440,000. At the time of the purchase, the company spent $35,000 to level the lot and another $40,000 to install storm drains. The company now wants to bu..
Compute the discount rate. Calculate the present value of total inflows. Calculate the present value of total outflows.
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