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A European call option and a put option on a stock both have a strike price of $30 and an expiration date in three months. Both options sell for $3.00. The risk-free rate is 8% per annum, the current stock price is $28, and a $1 dividend is expected in two months. Identify the arbitrage opportunity open to a trader, and quantify the arbitrage profit.
He takes home the car today. No payments are required until the end of the fifth month, when he pays $680. Payments of $680 are then due every month until (and including) the end of month 13. What is the equivalent present value today of all payments..
The U.S. dollar equivalent is 0.4502 for the Brazilian real and 1.4729 for the U.K. pound. Which one of the following statements is correct given this information? One U.S. dollar will buy 0.4502 Brazilian reals. If you have 0.4502 Brazilian real..
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be wort..
Tapley Inc. currently has total capital equal to $6 million, has zero debt, is in the 40% federal-plus-state tax bracket, has a net income of $2 million, and pays out 40% of its earnings as dividends. What is the stock's current price per share (befo..
What are the three distribution methods available to Annette? Which method should she choose to maximize tax deferral? Based on the appropriate life table, how much would her first required distribution be? When would this distribution happen?
Jim and eric work for media technical services (MTS) at cramer university in casper, Wyoming for “expenses” of $5, jim and eric used MTS facilities after hours to burn discs of Pearl, Jam’s CD Vitology for 25 friends or friends of friends from from.
A nuclear power company is deciding whether to build a nuclear plant at Chico Canyon or at Pleasantville. The cost of building the power plant is $14 million at Chico and $20 million at Pleasantville. Given this information, What is the maximum amoun..
A stock has an expected return of 10.2 percent, its beta is 1.03, and the risk-free rate is 6.40 percent. What must the expected return on the market be?
Suppose you are facing the following capital budgeting proposal: $100,000 initial cost, to be depreciated straight-line over 5 years to an expected salvage value of $5,000, 35% tax rate, $45,000 additional revenues for first year, and it is growing a..
A firm uses only debt and common stock to finance their operations and maintains a debt-equity ratio of 0.8. Suppose the firm only issues one bond. The information is as follows: the face value of bond is 1,000. Coupon rate is 6%, paid semiannually. ..
Calculate the growth rates of the two variables for each year since 1960. - Which is more volatile-GDP or investment? What might explain the difference in volatility?
You have recently been employed as a financial analyst to advise on the trading strategy for investing in the Australian dollar in a major Investment bank in Australia.
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