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Consider an American options on a stock index which pays dividends at the continuously compounded rate of 3% per year. The volatility of the index is 20% per year. Assume a current index value of 100, and a continuously compounded riskless rate of 2% per year. The options expire in two months
(a) Use the binomial option pricing model with ?t = 1/12 (one month) to estimate the price of an American call option with an exercise price of 100. Will the option be exercised early? If so, when?
(b) Use the binomial option pricing model with ?t = 1/12 (one month) to estimate the price of an American put option with an exercise price of 100. Will the option be exercised early? If so, when?
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Railway Cabooses just paid its annual dividend of $4.10 per share. The company has been reducing the dividends by 12.5 percent each year. How much are you willing to pay today to purchase stock in this company if your required rate of return is 14 pe..
What was the total amount of new money raised? What was the prospective stock price after the issue?
Calculating Total Cash Flows Volbeat Corp. shows the following information on its 2015 Income Statement: Sales $267,000; Costs $148,000; other expenses $8,200; depreciation $17,600; interest expense $12,400; taxes $32,600. What is the Operating Cash ..
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