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1. The current price of a stock is $21. In 1 year, the price will be either $27 or $15. The annual risk-free rate is 6%. Find the price of a call option on the stock that has a strike price is of $25 and that expires in 1 year. (Hint: Use daily compounding.) Round your answer to the nearest cent. Assume 365-day year. Do not round your intermediate calculations. (Sidenote- I tried doing the calculations and putting 0.94 as the answer and it ended up not being correct)
2. The current price of a stock is $16. In 6 months, the price will be either $19 or $11. The annual risk-free rate is 3%. Find the price of a call option on the stock that has a strike price of $14 and that expires in 6 months. (Hint: Use daily compounding.) Round your answer to the nearest cent. Assume a 365-day year. Do not round your intermediate calculations.
Money deposited in a certain bank doubles every 20 years. The bank compounds interest continuously. What annual interest rate does the bank offer?
MARKET CONTAGION It is said that global stock markets are intertwined/connected and that market performance in one part of the world could have fundamental impacts or influences on the markets in other parts of the world (contagion). OMEGA Study of ..
Jackson just received a settlement in a lawsuit that promises $230 in 7 years. The lawsuit will also pay him a second amount of $620 that will be received in 12 years. Jackson, being profligate, wants instead to spend the settlement money today. What..
Percy Motors has a target capital structure of 30% debt and 70% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 8%, and its tax rate is 40%. Percy's CFO estimates that the company's WACC is 15.00%. ..
Seattle Health Plans currently uses zero debt financing. Its operating profit is $1 million, and it pays taxes at a 40 percent rate. It has $5 million in assets and, because it is all-equity financed, $5 million in equity. What impact would the new c..
Garret Simpson Investments is evaluating a firm (Garp, Inc.) for recommendation to its clients and trying to evaluate the firm's current stock price. The firm is about to offer its shares to the public and had earnings last year of $2.50 a share, whi..
Evaluate the depreciation and what was Happe's Interest Expense on the bond during fiscal year 2012? What was Andersen Telecom's depreciation expense for tax purposes in fiscal year 2012?
Calculate NPV and IRR for the following investment. Initial investment = $1,000,000 machine, the project term is 6 years, sales for year 1 are estimated to be $1,000,000, and will grow by 7.5% per year through year 5, sales for year 6 = $500,000, var..
Does the American company enter the forward market to go long or short of forward DM? - What is the number of DM/$? What is the dollar value of the deutsche mark?
Examine the organization's sources of revenue (e.g., grants, individual donations, fees for service, etc.) relative to total revenue can also be useful.
You notice that the time is getting late and you decide to leave the office for the day, satisfied with your work thus far at Shefrain Consulting. Prior to leaving the office you check your company mailbox for the first time and notice a copy of Fort..
Has the inflation rate in the US increased or decreased in the past 5 years? Why? Have interest rates increased or decreased over that same period? Why? What can we likely expect of both in the near future?
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