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From Yahoo Finance or any other source choose one in-the-money or at-the-money call and put option and one out-of-the-money call and put option (a total of four options) on IBM stock. Note down the characteristics (strike, maturity etc.) and the prices of the options. Assume these are European options and do the following:
a. Compute the price of the options using the binomial model with five periods. Use 1.27% as the risk-free rate.
b. Compute the price of the options using the Black Scholes model, with the historical volatility (standard deviation) computed above.
c. Compute the percentage error between the option prices calculated above with each of the methods and the actual option prices you found on Yahoo Finance or another source.
calculate your final answer using the formula and financial calculator methods.
To what extent does a fund's diversification protect investors against defaults? Explain your answer.
If the market's required rate of return is 9% and the risk-free rate is 3%, what is the fund's required rate of return?
Assuming that all cash flows are discounted at 10%, calculate the effect of waiting on the project's risk, using the same data. By how much will delaying reduce the project's coefficient of variation? (Hint: Use the expected NPV.)
Compute the present value in B based on WACC; so compute WACC. Cost of debt after tax. Cost common.
Postcard depot large retailer post cards orders 7,664,874 postcards per year from its manufacture. Postcard depot plans on ordering postcard 12 times over the next year. Postcard depot receives the same number of postcards each time it orders. The ca..
Assuming that all of LilyMac’s sales are on credit, what will be the firm’s cash cycle?
Your firm is contemplating the purchase of a new $630,000 computer-based order entry system. If the tax rate is 40 percent, what is the IRR for this project?
International Foods Corporation (IFC) currently processes seafood with a unit it purchased several years ago. The unit, which originally cost $500,000, currently has a book value of $250,000. IFC is considering replacing the existing unit with a newe..
compute the divisor for this index. compute the index value at the close of day 2 3) At the close of day 2, stock C splits two.
Brady Inc. has a targeted capital structure of 40% debt, 10% preferred stock, and 50% common stock. Use the data below to calculate the company’s WACC.
TTC has been growing at a rate of 18% per year in recent years. This same growth rate is expected to last for another 2 years (g1 = g2 = 18%). What are its expected dividend yield at this time? What is the capital gains yield at this time? Find the e..
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