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You are given the following information: U.S. France Japan Nominal one year interest rate 5% 6% 7% Spot rate ----- $1.16 $0.008 Interest rate parity exists between the U.S. and France as well as the U.S. and Japan. The international Fisher effect exists between the U.S. and France as well as the U.S. and Japan. Bill (based in the U.S.) invests in a one-year CD (certificate of deposit) in France and sells euros one year forward to cover his position. Erica (based in France) invests in a one-year CD in Japan and does not cover her position. What are the returns on funds invested for Bill and Erica respectively? Please justify your explanation both in terms of theory and calculations. (Hint: You can get the exchange rate between euro and Japanese Yen from their respective rate to USD)
Use the Black-Scholes formula to find the value of a call option based on the following inputs.
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Currently has one bond issue outstanding. This bond pays a coupon rate of 10% ($100 p/yr) and matures in 5 years, and has a par value of $1,000. If you require a 14% rate of return. What percentage increase in value would occur for each bond due to t..
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What is the value of a 9-month call with a strike price of $55 given the Black-Scholes option pricing model and the following information?
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