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Use the Black- Scholes formula to find the value of a call option on the following stock: Time to expiration = 6 months; Standard deviation = 50% per year Exercise price = $ 50 Stock price = $ 50 Interest rate = 3% Find the value of a put option on the stock in the above problem with the same exercise price and expiration as the call option.
Bond Valuation-In 2013, Carnival Cruise Lines decided to sell some new bonds (something about fixing a big ship). They sold the bonds for $1,000 (face value) with a 20 year maturity and an 8% coupon. Two years have passed. Interest rates on similar b..
An agribusiness has the opportunity to invest in new energy saving equipment that will generate annual savings of $150,000 per year for the next 28 years. The equipment costs $535,185. The firm normally earns 12 percent on its capital investments. De..
Your employer offers a 401k that you can invest in as an employee of the firm. If you put in 3% of your pre-tax income (listed in question 1.a.), your employer will match 3%. a. Assuming you put in the full 3% during your first year of employment, ho..
You are developing a proposal to open three new mexican restaurants around the Metro Detroit area over the next four years. The project requires a purchase of $800,000 of equipment with a four year useful life and a book value of zero at the end of t..
Change in Financial Position. What do you think happens to your budget when your financial position changes? Financial Decision. In the previous question, you decide to pay off the car loan and invest the difference. Now you no longer have a $350 per..
Bond X is a premium bond making semiannual payments. The bond pays a coupon rate of 12 percent, has a YTM of 10 percent, and has 16 years to maturity. Bond Y is a discount bond making semiannual payments. If interest rates remain unchanged, what do y..
You bought a share of 6.40 percent preferred stock for $96.68 last year. The market price for your stock is now $100.92. What is your total return for last year?
Which one of the following statements is correct in relation to independent projects?
Unbeknownst to you, he purchased twenty acres of land for $5,000 in Cochise Stronghold 15 years ago. A rancher has been renting the land from him for $600 per acre per year since he bought it. Representatives from the Apache Indian tribe have come t..
Your spouse needs a car and you believe you can afford no more than $350 a month for a 5-year car loan. If the interest rate on this loan is 5% percent, what is the maximum you can afford to borrow to purchase this car? Your employer contributes $100..
Maverick Manufacturing, Inc., must purchase gold in three months for use in its operations. Maverick’s management has estimated that if the price of gold were to rise above $1,610 per ounce, the firm would go bankrupt. Should the company buy a call o..
Select a fund suitable for you to save money for your retirement. You are beginning to save today, and intend to contribute to the fund monthly throughout your career. Using the historical 5-year return number, how much would you need to save each mo..
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