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Today’s price of a non-dividend paying stock is $60. Use a two-step tree to value an American put option on the stock with a strike price of $50 that expires in 12 months. Each step is 6 months, the risk free rate is 10% per annum, and the volatility is 15%. Assume that the option is written on 100 shares of stock. a) What is the option price today? b) How would you hedge a position where you sell the put option today?
Suppose a foreign investor who holds tax-exempt Eurobonds paying 9% is considering investing in an equivalent-risk domestic bond in a country with a 34% withholding tax on interest paid to foreigners. If 9% after-tax is the investor's required ret..
A firm has a market value equal to its book value. Currently, the firm has excess cash of $1,400 and other assets of $3,500. Equity is worth $4,900. The firm has 700 shares of stock outstanding and net income of $1,450. The firm has decided to spend ..
Stock before a dividend/repurchase decision is made and the results under each of the three options.
What is variable life insurance? What are the advantages and disadvantages of variable life policies? How can individuals avoid the high fees of variable life insurance?
A Treasury bond that matures in 9 years has a yield of 3.1%. A 9-year corporate bond has a yield of 7.28%. Assume that the liquidity premium on the corporate bond is 0.34%. What is the default risk premium on the corporate bond?
What is the total asset turnover and the capital intensity?
A Eurodollar future contract for 3 months starting in one year is currently quoted at 94.98. What is the price of the Eurodollar today?
A forecast of Netflix, Inc., and Amazon.com, Inc.'s revenue, costs, and estimated cash flows into the next five years - A determination of the estimated fair
Use the discount payback method to calculate the Payback period.
Felicia & Fred’s Firm have now considered furthering their plans for expansion of manufacturing facilities. Their first option is by customizing and refurbishing the large former mill building located in New England near the main production facility...
Host government incentives for FDI. Why would foreign governments provide MNCs with incentives to undertake FDI there?
Castro Co. is considering the acquisition of a unit from the French government. Determine the NPV under these conditions.
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