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a) The current price of Excel Network Systems stock is £60 per share. In each of the next two years the stock price will either increase by 20% or decrease by 10%. The 3% one year risk free rate of interest will remain constant. Calculate the price of a two year European put option on Excel Network Systems stock with a strike price of £60. Use binomial pricing
b) Suppose you want to buy a call option under the following circumstances: d1=ln[S/PV(X)]/(sigmaT1/2)+(sigmaT1/2/2) and d2= d1- sigmaT1/2.
Stock price S = £100 Exercise/strike price X = £95 Interest rate r = 10% per year Time to maturity T = 3 months or 0.25 Standard deviation ? = 50% Value this option using the Black-Scholes valuation method.
Explain the differences between pledging and factoring receivables. Explain the difference between a floating lien and a trust receipts arrangement.
FINA6017 Financial Management. The analysis of the case study must: Analyse the financial statements of the business; Identify what the key ratios are and apply ratio analysis
Write an algebraic expression that represents the total annual income from both investments. Simplify the expression.
Kuhn Co. is considering a new project that will require an initial investment of 20 million. It has a target capital structure of 35% debt, 2% preferred stock, and 63% common equity. Kuhn does not have any retained earnings available to finance this ..
Assume that interest rate parity holds. In both the spot market and the 90-day forward market 1 Japanese yen equals 0.0086 dollar. In Japan, 90-day risk-free securities yield 4.9%. What is the yield on 90-day risk-free securities in the United States..
An insurance company owns a 1,000 par value 10% bond with semiannual coupons. The bond will mature for 1,000 at the end of 10 years. The company decides that an 8-year bond would be preferable. Current yield rates are 7% compounded semiannually. The ..
High electricity costs have made Farmer Corporation’s chicken-plucking machine economically worthless. Only two machines are available to replace it. The International Plucking Machine (IPM) model is available only on a lease basis. Farmer is in the ..
Bond X is a premium bond making semiannual payments. what do you expect the price of these bonds to be one year from now?
You are hoping to buy a house in the future and recently received an inheritance of ?$18, 000. You intend to use your inheritance as down payment on your house.
Lakonishok Equipment has an investment opportunity in Europe. The project costs €12 million and is expected to produce cash flows of €1.9 million in Year 1, €2.3 million in Year 2, and €3.4 million in Year 3. The current spot exchange rate is $1.34 /..
If the risk-free rate is 2% and the market risk premium is 6%, what should be the price of the stock?
WACC The Pawlson Company year-end balance sheet is shown below. Calculate Pawlson's WACC using market-value weights.
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