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a) The current price of Natasha corporation stock is $6. In each of the next two years, this stock price can either go up by $2.50 or go down by $2.00. The stock pays no dividends. The one-year risk free rate is 3% and will remain constant. Using the binomial model, calculate the price of a two-year call option on Natasha stock with a strike price of $7.
b) Rebecca is interested in purchasing a European call on a hot new stock, UP, Inc. the call has a strike price of $100 and expires in 90 days. The current price of UP
stock is $120 and the stock has a standard deviation of 40% per year. The risk free interest rate is 6.18% per year. d1=ln[S/PV(K)]/σT1/2+ σT1/2/2 and d2= d1- σT1/2
Using the Black-Scholes formula to compute the price of the call.
c) Use put-call parity to compute the price of the put with the same strike and expiration date.
The conversion rate is 12.8793 shares per $1000 bond. Calculate the conversion price in dollars and the premium as a percentage. Then discuss reasons to explain the size of the premium. Explain why Twitter decided to issue convertible bonds instea..
Assume the company has a required return of 12%. Clearly show your calculations of the annual net cash flows and how you calculated the NPV and IRR.
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Prepare a pro forma balance sheet dated December 31, 2014. Discuss the financing changes suggested by the statement prepared in parta.
What is the probability that the third and fifth gumballs selected for the customer's random assortment will be white, and other four will not be white?
A sample of size 20 was taken from the production line and yielded a standard deviation of 0.070.
Briefly describe why a company would institute a bonus plan, and compute the amount in the bonus pool if Jordan Brothers shows net income of $300,000. Prepare the journal entry that would be recorded to reflect the bonus liability at the end of th..
What is the Corporate Bond Market, and what are key differences between the bond and stock markets?
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n 1999, the euro was trading at $0.90 per euro. If the euro is now trading at $1.16 per euro, what is the percentage change in the euro’s value? Is this an appreciation or depreciation?
mau corporation stock currently sells for 58.32 per share. the market requires a return of 11.5 percent on the firms
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