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Consider a one-period, two state case in which XYZ stock is trading at So=$35, has u of 1.05and d of 1/1.05, and which the period risk-free rate is 2%.
Using the BOPM, determine the equilibrium price of an XYZ 35 European call option expiring at the end of the period.
Explain what an arbitrageur would do if the XYZ 3 European call was priced at $1.35. Show what arbitrageur’s cash flow would be at expiration when she closed.
Explain what an arbitrageur would do if the XYZ 35 European call was priced at $1.10. Show what arbitrageur’s cash flow would be at expiration when she closed.
Calculate the expected return of the portfolio. Calculate the beta of the portfolio.
Compute the price of a 5.5 percent coupon bond with 15 years left to maturity and a market interest rate of 8.8 percent.
Star Light & Power increases its dividend 4.1 percent per year every year. This utility is valued using a discount rate of 12 percent, and the stock currently sells for $41 per share. If you buy a share of stock today and hold on to it for at least t..
Find the future value of the following annuities. The first payment in these annuities is made at the end of Year 1; that is, they are ordinary annuities. Then, without clearing the TVM register, you can "override" the variable that changes by simply..
Describe the competitive positioning you face and are going to take, the tradeoffs you face with differentiation, the cost, and any pricing options you might offer. Be creative! You need the money.
Richard is using the capital retention approach to determine how much life insurance to purchase. Richard would like to provide $45,000 per year to his family, forever, if he dies. If life insurance proceeds can be invested to earn a 5 percent annua..
What is the current value of Bandag Inc. to an investor who has a required rate of return of 12%? The current dividend is $1.00 and the dividends are expected to grow 8% per year for 3 years. At the end of the 3 years the investor expects to sell the..
You purchased an investment which will pay you $10,000, in real dollars, a year for the next five years. Each payment will be received at the end of the period with the first payment occurring one year from today. The nominal discount rate is 10 perc..
You are considering a project that requires an initial investment of $50,000. It's expected cash flows are $10,000 per year for the next 6 years. The cost of capital is 10%. What is this project's modified internal rate of return? You are considering..
A company's 5-year bonds are yielding 9.8% per year. what is the default risk premium on the corporate bonds?
Your boss has heard of a new company called Vision Point that offers a complete accountsreceivable system for interested firms. Visit their Web site and then prepare a 1-page memo for your boss summarizing Vision Point's services.
Which of the following accounts do you prefer as a saver? How much will you have saved after 30 years if you deposit $1000 today in account 2?
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