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Options can be used either to scale up or reduce overall protfolio risk. a) What are some examples of risk-increasing and risk-reducing options strategies? Explain each. b). Why do you think the most actively traded options tend to be the ones that are near the money?
Firm BestHockeySticks needs to buy rubber to manufacture their hockey pucks. Specifically, they need to buy 3 tons of rubber for next winter, January 2017 (T = 3/4). The future price of rubber is uncertain. BestHockeySticks buys 2 Call options with s..
The Nanotechnology Research Company recently reported after-tax profits of $15.8 million. It has 2.5 million shares of common stock outstanding and pays preferred dividends of $1 million a year. The company's stock currently trades at $60 per share. ..
Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 26 percent for the next three years, with the growth rate falling off to a constant 6 percent thereafter. If the required return is 12 percent, and the company just paid a di..
You purchase a bond with a coupon rate of 8.7 percent and a clean price of $870. If the next semiannual coupon payment is due in two months, what is the invoice price?
There is some debate on whether Multinational Corporations (MNC’s) increase risk when borrowing foreign currencies. Those in favor of borrowing state that lower costs of financing can be achieved and it improves their ability to compete. Those agains..
Convertible bonds are:
Hull Baking Company uses 250,000 lb of sugar annually in its cakes and pastries. The company can order the sugar in 100 lb bags, at the cost of $19.50 per bag, delivered. The cost of preparing and sending an order is $50. The storage and handling cos..
Discuss the issues of financial management in a non-profit organisation and compare and contrast it with financial management in a for- profit organisation.
Calculate the internal rate of return on the following set of cash flows, according to Teichroews economic interpretation of internal rate of return.
You are considering constructing a new plant in a remote wilderness area to process the ore from a planned mining operation. You anticipate that the plant will take a year to build and cost $99 million upfront. Using a cost of capital of 12%, what is..
Suppose you are using the Justified P/E approach to value a company. The current P/E ratio is $7. If the expected retention ratio for this company is 55%, the growth rate is 5% and the required return is 15%, what is the justified forward and justifi..
Davis Inc. expects to have net income of $5,000,000 during the next year. Plato's target capital structure is 40% debt and 60% equity. The company has determined that the optimal capital budget for the coming year is $6,000,000. If Davis follows a re..
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