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1. We used the basic equation of S + P = B + C in class to show that we could create the payoff of B from the other three variables. Show how the equation can be used to solve for the payoffs of the other three variables. Make sure to utilize payoff diagrams.
2. Go out to Yahoo! Finance and find a stock that has options traded on it. Look for pairs of puts and calls with the same exercise price that are as close to at the money as possible. From this market data, create the following investment strategies: 1) straddle, 2) strangle, 3) strap, and 4) strip. Derive the profits from these strategies over possible stock prices. Draw the payoff diagram for each strategy.
A 7-year annuity of fourteen $10,600 semiannual payments will begin 9 years from now, what is the value of this annuity five years from now?
Quad Enterprises is considering a new three-year e... Bookmark Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.9 million. The fixed asset will be depreciated straight-line to ze..
Music City, Inc., has no debt outstanding and a total market value of $295,000. Earnings before interest and taxes, EBIT, are projected to be $22,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 25..
A project with an initial investment outflow of $X and level in flows of $150 at the end of the year for twenty years has an internal rate of return of 11.5%. What is the net present value of a project with triple the inflows and outflows where the r..
XYZ Corp. paid a dividend today of $5 per share. If XYZ Corp. stock is selling for $50.00 per share, what is the stockholders' expected rate of return?
Assume you have recently graduated with your business degree, and landed a new position at a company you had been researching during your senior year in college. You have been offered a lump-sum, sign-on bonus of $5,000. Would you personally choose ..
A non-participating physician provides service to a Medicare patient that has total charges of $700. If Medicare's approved schedule for these services is $600 and the physician accepts. How much will Medicare pay the?
Mikes services is now at the end fo the final year of a project. The equipment orginally cost 22,500 of which 75% has been depreciaed. Mike can sell it today at 6000 and its tax rate is 40%. What is the equipment's after tax salvage value for use in ..
The Brocks now have two preschool-age children. Their household income has declined with Pam providing full-time care for the children. To compensate for their lower monthly income, Pam and Josh have cut back to spend money on basics only. What actio..
Assume that you're able to reduce the working capital at the beginning of the project, and that the NWC will revert back to normal at the end of the project. If all other given information stays the same, what is the NPV of this project?
Determine the tax consequences to Zane and Sturdley in each of the following alternative situations.
Frank Smith Plumbing Data Needed foranalysis: Project Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year -7 Year- 8 Cost of Capital (borrowing) 7.5% Cost of Truck $185,000 Cost of additional equipment attached to truck $25,000 Tax rate 25% Annual Before ..
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