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A 10-month European call option on a stock is currently selling for $5. The stock price is $64the strike price is $60. The continuously-compounded risk-free interest rate is 5% per annum for all maturities. 1) Suppose that the stock pays no dividend in the next ten months, and that the price of a 10-month European put with a strike price of $60 on the same stock is trading at $1. Is there an arbitrage opportunity? If yes, how can you take advantage of it to make profit? 2) Now suppose instead that a dividend of $10 will be paid in six months. What price do you expect a 10-month European put with a strike price of $60 on the same stock to be trading at?
Gina Dare, who wishes to be a millionaire, plans to retire at the end of forty years. Gina's plan is to invest her money by depositing into an IRA at the end of every year.
You bought Chemtron stock for $45 a year ago. It is selling for $54 today. What is your holding period return?
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Suppose you are an analyst studying Beranek Technologies, which was founded ten years ago. It has been profitable for the last five years, but it has needed all of its earnings to support growth and thus has never paid a dividend.
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The Mann Corporation belongs to a risk class for which the appropriate discount rate is 10%. Mann currently has 100,000 outstanding shares selling at $100 each.
From a financial perspective, should Mercy lease the surgical device or borrow the money to purchase it? Show your work.
investment projects should never be selected through purely mechanical processes. managers should ask questions about
Explain Capital Budgeting decision based on NPV of the project and the cost of aerators is expected to increase at 4 percent per year far into the foreseeable future
A firm stock is selling at $95.00 per share. Its growth rate is 10% and investors demand is 15% on this stock. What is the firms expected dividend?
Given the following cash flow pattern, how much would you be willing to pay to purchase it? Assume an 8% APR discount rate.
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