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1. Suppose you have $1000 and plan to purchase a 4-year certificate of deposit (CD) that pays 3% interest, compounded annually. How much will you have when the CD matures?
A. 1124.86
B. 1125.51
C. 885.29
D. 1360.49
2. Suppose a U.S. government bond promises to pay $2254.73 four years from now. If the going interest rate on 4-year government bonds is 5%, how much is the bond worth today?
A. 2147.36
B. 1766.64
C. 1854.97
D. 1853.22
E. 1540.01
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ACME Corporation had revenues of $867,030 in 2014. It also had expenses (excluding depreciation) of $356,240, depreciation of $103,456, and interest expense of $52,423. What was the company's net income after taxes if its average tax rate was 40 perc..
It is now January 1, 2012, and you are considering the purchase of an outstanding bond that was issued on January 1, 2008. It has a 7 percent annual coupon and had a 30-year original maturity. what rate of return would you probably earn, assuming you..
Joel Franklin is a portfolio manager responsible for derivatives. Franklin observes an American-style option and a European-style option with the same strike price, expiration, and underlying stock. Calculate, using put-call parity and the informatio..
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The Black-Scholes model introduced standard options pricing method which is very useful among users. With reference to above, explain Black and Scholes model and its limitations reviewing published journal articles.
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The S&P 500 index is currently priced at 1,400. The dividend yield on the index is zero. The current risk free rate is 5%. What is the no-arbitrage forward price for delivery in 6 months? You are a market maker. Demonstrate how you would hedge your p..
Steve owns a store that caters primarily to men and their hobbies. He is contemplating greatly expanding the hunting and fishing section of the store. If he does this, he expects his fishing and hunting sales will increase, his camping gear sales wil..
A stock has had returns of 11 percent, -8 percent, 6 percent, 21 percent, 24 percent, and 16 percent over the last six years. What is the arithmetic return? What is the geometric return for this stock? What is the standard deviation? (use the arithme..
You are planning to move next year. You recently told your best friend that you have decided to sell all of your current furniture just prior to moving as you do not want to pay to transport it across the country. Your friend offered to pay you $2,00..
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