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One-step binomial Tree. Suppose that a stock price is $10 per share at current time and at the end of 3 months the stock price may either move up to $11 or down to $9. Consider a European call option which allows to buy the stocks at $10.5 per share at the end of three months. The risk-free interest rate is 12% per annum. Find the fair price for the option. If the option can be bought or sold at $0.8 per share, devise an investment strategy to show the existence of arbitrage.
You want to buy 20 shares per month for 20 years calculate how much money you need to do so. Assume a constant stick price.
However, when it does this, the firm wants the stock price increased to at least twice its preferred minimum as it is concerned the price will fall further. Which one of the following stock split ratios is most appropriate for this situation?
Suppose your company needs to raise $48 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 6 percent, and you’re evaluating two issue alternatives: Calculate the aftertax cash flows for..
You have just received notification that you have won the $1 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you’re around to collect), 80 years from now. What is the present value of..
The stock of Jenkins Corporation, a major steel producer, is currently selling for $50 per share. The book value per share is $125. In contrast, the price per share of Data quests stock is $40, compared to a book value per share of $10. Dataquest, a ..
what is the value of the bond? What is the value if the interest is paid annually?
What role is managed care expected to play under the Affordable Care Act?
Your bank's estimated liquidity gap over the next 90 days equals $ 180 million. You estimate that projected funding sources over the same 90 days will equal only $ 150 million. What planning and policy requirements does this impose on your $ 3 billio..
The first reason should involve the time value of money. The second reason should apply even if interest rates are zero.
You have just borrowed $100,000, and you agree to pay it back over the next 25 years in 25 equal end-of-year payments plus 10 percent compound interest on the unpaid balance. What will be the size of these payments?
Investors expect the market rate of return this year to be 13.50%. The expected rate of return on a stock with a beta of 1.7 is currently 22.95%. If the market return this year turns out to be 11.20%, how would you revise your expectation of the rate..
A current dividend of $1.80. Dividends are expected to grow at a rate of 7 percent a year into the foreseeable future. What's the cost of external equity if its stock can be sold to net $46 a share?
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