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Suppose XYZ is a non-dividend-paying stock. The current stock price is S = $60, the volatility is ? = 40%, and the risk-free interest rate is r = 3%.
(a) Using the Black-Scholes-Merton formula or the Black-Scholes-Merton calculator, find the price of a three-year European call option on XYZ with a strike price of $65.
(b) Using put-call parity, find the price of a three-year European put option on XYZ with the same strike price. (Please show the calculation using put-call parity. Do not simply take the put value from a Black-Scholes-Merton calculator.)
You are considering the purchase of Zee Company stock. You anticipate that the company will pay dividends of $3.50 per share next year and $4.00 per share the following year. You believe that you can sell the stock for $20.00 per share two years from..
what is Fluorine? Chemical's expected return for the coming? year.
The shareholders of Motive Power Corp. need to elect four new directors to the board. There are 14,700,000 shares of common stock outstanding, and the current share price is $11.00. If the company uses cumulative voting procedures, how much will it c..
A firm issues a 10-year Eurobond with a par value of JPY 10 billion. Annual interest payments of 2.2% are calculated based on par value. If the issue price is 101 percent, what is the cost of debt?
How much less can the borrower with a 6% mortgage borrow to keep the same monthly mortgage payment as the borrower with a 5%.
The McGee Corporation finds it is necessary to determine its marginal cost of capital. McGee’s current capital structure calls for 50 percent debt, 25 percent preferred stock, and 25 percent common equity. Initially, common equity will be in the form..
Underlying trading at $100, and $20 annualized implied volatility. You think IV is too low and decide to buy a 90-110 strangle with 3 months to expiration.
What are the difficulties with determining the cash flows of a project? What are some techniques that firms use to account for project risk?
Determine the fair present value of the bond if market conditions justify a 10.5 percent, compounded quarterly, required rate of return.
Which one of the following is the computation of the risk premium for an individual security? E(R) is the expected return on the security, Rf is the risk-free rate, β is the security's beta, and E(RM) is the expected rate of return on the market.
Discuss differences between cash flow and accounting income and why it is important to use cash flow in making capital budgeting decisions. How do companies generate ideas for capital projects? Give some examples of capital projects that companies in..
Caballos, Inc., has a debt to capital ratio of 11%, a beta of 1.81 and a pre-tax cost of debt of 5.5%. Estimate the FCFF.
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