Disadvantages to payback period and to return on investment

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Reference no: EM131891991

1. Discuss the advantages and disadvantages to payback period and to return on investment (ROI) as analysis tools for making capital investment decisions. Which do you prefer and why?.

2. A call and a put option on the same non-dividend-paying stock, with the same $40 strike price, and with the same 1-year expiration date sell for $7.95 and $2.98 respectively. If the underlying stock price is $42, what is the no-arbitrage futures price for a one-year futures contract on the underlying stock?

3. What is the consequence of adverse selection and moral hazard problems for the market of borrowed funds?

Reference no: EM131891991

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