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F (Ford Motor Company) at-the-money call options for May expiry are trading at $.50/share. At-the-money put options trade at $.45/share. The stock trades at $13.50/share. You have a hunch that Saudi Arabia is about to announce some action on oil production, though you do not know if they are going to increase it or reduce it. You are certain that whatever it is it will impact the auto companies, though. This potential uncertainty should increase the volatility of the stock prices of the auto companies. What would be your expectation of the impact on the option prices of Ford? How might you be able to profit from this? (Hint: this is a volatility trade.)
If the inflation rate last year was 4 percent, what was your total real rate of return on this investment?
If you form a 50-50 portfolio of the two stocks, what is the portfolio's standard deviation?
DeYoung Entertainment Enterprise is considering replacing the latex molding machine it uses to fabricate rubber chickens with a newer, more efficient model. What is the initial net cash flow if the new machine is purchased and the old one is replaced..
Bob and Nancy have recently expanded their educational film business. Determine whether process costing method represents acceptable accounting procedure.
You plan on retiring in 20 years. You currently have $275,000 and think you will need $1,000,000 to retire. Assuming you don’t deposit any additional money into the account, what annual return you will need to earn to meet this goal.
Todd is able to pay $320 a month for 5 years for a car. If the interest rate is 6.3 percent, how much can Todd afford to borrow to buy a car?
What is the required return for Dentrix Corporation? The risk-free rate is 2.7%, the risk premium is 7.7, the expected rate of inflation is 3.4% and the company can currently issue bonds at a YTM of 4.9%. The company's beta is estimated to be 0.9.
Calculating Annuity Present value / An investment offers $1,500 per year for 12 years, with the first payment occurring one year from now. If the required return is 12 percent, what is the value of the investment? What would the value be if the payme..
What is the purchase price of a 39-week “T-bill” (US Treasury note) with a maturity value of $4500 that earns an annual interest rate of 3.25 % ? How long (in years) will it take $1000 to triple if it is invested at 7.0% compounded continuously? Roun..
The risk-free rate of return is currently 4 percent and the market risk premium is 8.8 percent. What is the probability that bostonmarket.com's stock is currently overvalued?
GDebi Enterprises is thinking of building a chemical processing plant to produce 4-hydroxy-3-methoxybenzaldehyde. The firm estimates that the initial cost of the project will be $10.6 million, and the plant will produce cash inflows of $6 million for..
Compute the effective cost of not taking the cash discount under the following trade credit terms:
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