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Utilize the Put/Call Parity principle to analyze the following situation and discuss whether there is a profitable strategy. If there is a profitable strategy, what is it? Explain your calculations.
Stock Price = $80
Call Price = $16, one year expiration
Put Price = $2, one year expiration
Strike Price = $70
Risk free rate =3%
You have an outstanding balance of $1,000 on your credit card. The bank that issued your credit card will charge you 20% annual interest rate on your outstanding credit card balance. Interest is compounded daily. IF you do not make any payments of pr..
Independent of item 4, your company needs to raise capital to build an addition. The addition is 5% of your current total assets. What debt/equity mix is the best mix and why? how long will it take for the project to be accepted?
The common stock of ABC Homes has an expected return of 13.6% and a beta of 0.7. The expected return on the market portfolio is 16%. What is the risk-free rate?
Under an effective interest rate of 5%, the sum of the present value of an annuity which pays $4 at the end of each period for n periods and the present value of a unique payment of $100 at the end of the nth period is equal to the sum of the present..
Compute the payback statistic for Project A and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 8 percent and the maximum allowable payback is four years.
A factory costs $800,000. You reckon that it will produce an inflow after operating costs of $170,000 a year for 10 years. If the opportunity cost of capital is 14%, what is the net present value (NPV) of the factory?
You are deciding whether to add Bard Publishing to your portfolio, but you are concerned about your projection for their growth rate. Bard's cost of equity capital (the discount rate for equity) is known to be 9% and they just paid a dividend of $4.7..
You have $10,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 16% and Stock Y with an expected return of 11%. If your goal is to create a portfolio with an expected return of 14.25%, how much money will you inve..
You will document your understanding and learning relative to the course requirements as summarized in the course description. This must include how you will or could use the learning in your personal and/or professional decision making.
Go to a financial Web site, such as finance.yahoo.com, google.com/finance, or moneycentral.msn.com. Obtain information on the yields and maturity for: U.S. treasuries, Municipal bonds, Corporate bonds
Imagination Dragons Corporation needs to raise funds to finance a plant expansion, and it has decided to issue 20-year zero coupon bonds with a par value of $1,000 each to raise the money. The required return on the bonds will be 7 percent. Assume se..
A 10-year U.S. Treasury bond with a face value of $10,000 pays a coupon of 6.5% every six months. The semi annually compounded interest rate is 5.0%. What is the present value of the bond?
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