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Consider a 3-month European put option on a non-dividend-paying stock, where the stock price is $50, the strike price is $50, the risk-free rate is 3% per annum. Stock price will either move up by 10% or down by 5%, every month. Price the put with binomial trees.
Use the Black-Scholes model to determine the price of a European call option on a non-dividend paying stock when the stock price is $37.50,
Suppose a 25mm new venture has a 50% chance of success or failure. Success is 10mm per year perpetual earnings and failure is 8mm per year perpetual losses. The discount rate is 10%. What is the NPV for each scenario? What is the simple expected NPV?..
A US$ corporate bond can never have a yield lower than a US government bond with the same maturity. If interest rates rise a 10-year zero coupon bond would fall by about half as much as a 5-year zero coupon bond. The capital appreciation on the Nikke..
Find the monthly returns for the two stocks. Find the annualized expected return for each stock.
Free Cash Flow Catering Corp. reported free cash flows for 2008 of $8.18 million and investment in operating capital of $2.18 million. Catering listed $0.91 million in depreciation expense and $2.18 million in taxes on its 2008 income statement. What..
What will the holder receive when the bond matures? If the current rate of interest on a comparable debt is 8 percent, what should be the price of this bond? Would you expect the firm to call this bond Why?
An investor is considering purchasing a bond with a 6.6% coupon interest rate, a par value of $1000. , and a market price of 1079.36.. the bond will mature in 9 years... What is the bonds current yield What is the bonds approximate yield to maturity ..
What are specific ways banks impact economy? How was regulatory environment revised? What risk management standards had to be employed as result of legislation?
A share of stock will pay a dividend of $1.9 one year from now, with dividend growth of 5.3 percent thereafter. According to the constant dividend growth model, if the required return is 14.4 percent, what should the value of the stock be 4 years fro..
A company issues a 20-year, callable bond at par with a(n) 9% annual coupon rate. The bond can be called in three years or any time after that on a coupon payment date. The call price is $110 per $100 of face value. On issue it has a price equal to p..
If the market conditions remain unchanged, what should the Capital Gains Yield of the bond?
Understanding project contractors and construction contracting businesses using business ratio analysis - You can pick so that all your chosen firms are examples of firms having a high, or all a low, value for your core ratio; or else you can pick s..
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