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1. Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $28, (2) strike price is $35, (3) time to expiration is 2 months, (4) annualized risk-free rate is 6%, and (5) variance of stock return is 0.31. Round your answer to the nearest cent. In your calculations round normal distribution values to 4 decimal places.
2. 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.
3. 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.
Cyree Inc. has annual sales of $80,000,000; its average inventory is $20,000,000; and its average accounts receivable is $16,000,000. The firm buys all raw materials on terms of next 35 days, and it pays on time. The firm is searching for ways to sho..
Consider the following information and then calculate the required rate of return for the Global Investment Fund, which holds 4 stocks. The market's required rate of return is 14.00%, the risk-free rate is 3.00%, and the Fund's assets are as follows:..
The option expires on March 20, 2007. Estimate the price of a March 126 put.- What is the volatility implied by the price you estimate for this option?
A firm's before-tax cost of debt, rd, is the interest rate that the firm must pay on -Select-outstandingsecurednewItem 1 debt. Because interest is tax deductible, the relevant cost of -Select-outstandingsecurednewItem 2 debt used to calculate a fir..
Bushwhacker Mowing needs $360 million to support growth. If it issues new common stock to raise the funds, the flotation (issuance) costs will be 4 percent. If Bushwhacker can issue stock at $60 per share, how many shares of common stock must be issu..
Yet, they sometimes close the facility later because the cost advantage dissipates. Why do you think the relative cost advantage of these countries is reduced over time?
Rolston Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $26,600, and the company expects to sell 1,510 per year. The company currently sells 2,010 units of its existing model per year..
What risks do companies face doing business internationally that they do not face doing business domestically? Do you think now is a good time to invest internationally? If you were to invest internationally, what countries or industries do you thin..
The company had paid a regular cash dividend to its stockholders for over 50 years. In its most current operating year, the company experienced a severe cash flow crisis and would be unable to pay its dividend without having to borrow the money.
A parent holding company sells shares in its subsidiary such that the parent now owns only 65% of the subsidiary and, thus, the tax returns of the parent and its subsidiary can't be consolidated. The parent receives annual dividends from the subsidia..
The interest rate on one year treasury bonds is 1%, The rate on two year T-bonds is 0.9% and the rate on three-year T-bonds is 0.8%. Using the expectations theory compute the expected one year interest rates in (a) the second year (Year two only) and..
Gilligan Co.'s bonds currently sell for $1,150. They have a 6.75% annual coupon rate and a 15-year maturity, and are callable in 6 years at $1,067.50. Assume that no costs other than the call premium would be incurred to call and refund the bonds, an..
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