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Suppose you are considering selling a one year call options with a strike price of $80 for a stock that is currently trading at $75. The risk free interest rate is 4%.
The cost per option is $8.152, ? = 0.527, G = .018, and ? = -.016.
If the price of the stock were to move to $74.
A)Use the approximation to estimate the new price of the call option.
B) Use the - G approximation to estimate the new price of the call option.
Suppose firm A and firm B are planning on merging. There are no costs or synergy benefits from the merger. Before the merger firm A has an issue of bonds outstanding. These bonds entitle the holder to a payment of $80 million when the bonds mature ne..
You have been asked to calculate the WACC for a firm. The firm has short-term debt that has a return of 4.50%. The amount outstanding of the short-term debt is $100 million. The firm also has long-term debt that has a par amount of $300 million, a co..
Define the following terms: period dividend, annual dividend, value and dividend adjustment for split.
Are these changes permissible under generally accepted accounting principles?
The diversification in a portfolio is used to reduce risks in the overall stocks by lowering the correlations. For instance the coefficients that are measured range in a percentage such as 1 to 100 percent.
When is the return on assets equal to the return on equity?
How does the profit profile compare with purchasing a call on underlying security at the same exercise price and maturity?
What is the most likely correlation coefficient between a stock-index mutual fund and the S&P 500?
Calculate the standard deviation of the returns for large company stocks and t-bills over this time period.
If interest rate parity holds, what is the nominal annual interest rate on default-free 6-month British bonds?
Schalheim Sisters Inc. has always paid out all of its earnings as dividends; Which of the following events would REDUCE its WACC?
You expect to receive $15,500 at graduation in three years. You plan on investing it at 12 percent until you have $86,000. How long will you wait from now? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g...
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