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Suppose that put options on a stock with strike prices $45 and $55 cost $2 and $8, respectively. Use these options to create a bear spread. At what stock price at maturity will you break even? In other words, at what stock price, will you make $0 profit?
Please show your work?
Bill’s Bakery expects earnings per share of $3.22 next year. Current book value is $5.2 per share. The appropriate discount rate for Bill’s Bakery is 14 percent. Calculate the share price for Bill’s Bakery if earnings grow at 4 percent forever.
You own a two-bond portfolio. Each has a par value of $1,000. Bond A matures in five years, has a coupon rate of 8 percent, and has an annual yield to maturity of 9.20 percent. Bond B matures in fifteen years, has a coupon rate of 8 percent and has a..
What are the major differences between corporate cause promotion and cause-related marketing? Explain the major differences between the two different initiatives.
You need to accumulate $72,841 for your son's education. You have decided to place equal year-end deposits in a savings account for the next 18 years. The savings account pays 8.42 percent per year, compounded annually. How much will each annual paym..
A $10,000 ten-year bond was issued at an interest rate of 6%. It is now year 9 and you are thinking about buying the bond from its owner. Interest rates are now 9%. (Taylor & Greenlaw, 2014, p. 403). Would you now expect to pay more or less than $10,..
How do you compute NPV and IRR from the following information?
A project has a net present value of zero. Which one of the following best describes this project?
A local restaurant owner is considering expanding into another rural area. The expansion project will be financed through a line of credit with City Bank. The administrative costs of obtaining the line of credit are $500, and the interest payments ar..
Land, buildings and equipment are acquired for a lump sum of $875,000. The market values of the three assets are, respectively, $200,000, $500,000 and $300,000. What is the cost assigned to the equipment?
Investment and Loan Planning. The employee credit union at State University is planning the usage of funds for the coming year. The credit union makes four types of loans to its members. In addition, it invests in “risk-free” securities in order to s..
A U.S. investor is considering two stocks and wishes to select one of them for his portfolio. Data on these stocks follow. Assume that the U.S. risk-free rate is 6 percent. Calculate the Sharpe index for each stock. Which stock would you prefer for y..
what are main elements in calculating the cost of capital? how would an increase in debt affect it? how would you
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