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You have a short position in a put option on Google stock where the strike price is $540. If Google closes at $550 on the day that the option expires, what will be your gross payoff per share (disregarding the upfront premium)?
You buy a share of stock, write a one-year call option with X = $15, and buy a one-year put option with X = $15. Your net outlay to establish the entire portfolio is $14.50. What must be the risk-free interest rate? The stock pays no dividends.
The property appraisal office for Mobile County has just installed new software to track residential market values for property tax computations. The manager wants to know the total equivalent cost of all future costs incurred when the county commiss..
Friendly’s Quick Loans, Inc., offers you $7.25 today but you must repay $9.25 when you get your paycheck in one week (or else) 1)What is the effective annual return Friendly’s earns on this lending business? 2) If you were brave enough to ask, what A..
Burton, a manufacturer of snowboards, is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given. The proposed machine will cost $120,000 and have installation costs of$15,000. lt wil..
Does put-call parity mean the put and the call option (of the same stock, with same expiration, with same strike price) have the same value/price? A European call option and a European put option on a stock both have the same strike price of $45 and ..
a) The price of a 1-year zero is $96.00, the price of a 2-year 10% coupon bond is $107.30 and the price of a 3-year 8% coupon bond is $102.25. Use the bootstrap method to calculate all zero rates. Given the bonds in (a), what is the price of a 3 year..
Assume that the returns from an asset are normally distributed. The average annual return for this asset over a specific period was 17.1 percent and the standard deviation of those returns in this period was 41.7 percent. What about triple in value?..
Kordyk Corporation's bonds have a 15-year maturity, a 8.2% semiannual coupon, and a par value of $1,000. The going interest rate (YTM) is 8.0%, based on semiannual compounding. What is the bond’s price?
A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $240,000 a year for the next 50 years. The attorney for the plaintiff’s estate argues that the lost income should be discounted back to the present at..
Given that the risk-free rate is 5%, the expected return on the market portfolio is 20%, and the standard deviation of returns to the market portfolio is 20%, answer the following questions: a. You have $100,000 to invest. How should you allocate you..
A woman purchases a 10-year par bond with 8% semi-annual coupons. The bond is priced to yield 7.5% converted semi-annually. The coupons are reinvested in a fund paying 7.0% nominal, converted semi-annually. What is her nominal annual yield on this in..
Greg’s Pharmacy uses a periodic review inventory system. Every Friday, the pharmacist reviews her inventory and determines the size of the replenishment order. Determine the order quantity (Q). How many tablets should be ordered if the current invent..
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