Reference no: EM13752317
Problem 1: In the Capital Asset Pricing Model (CAPM) the expected return of a security should be a function and only a function of what type of risk? Explain why other forms of risk are not important.
Problem 2: According to the Black-Scholes option pricing model, what factors are important for pricing options?
a) IBM's stock price is at $100 per share. A June 100 call option (exercise price 100) is trading for $3 a share. What is the intrinsic value and what is the time premium? Explain why it has a positive price?
b) If on May 1, 2009, three call options on Richmond Associates stock, all expiring in December 2009, sold for the following prices:
Exercise Price Option Premium
$50 $7.50
$60 $3.00
$70 $1.50
You buy one call with $50 exercise price, sell (write) two calls with $60 exercise price, buy one call with $70 exercise price.
What is your net profit (loss) if Richmond Associates' stock price is $54 at expiration?
|
Is us making progress in reducing or preventing terrorism
: Is the United States making progress in reducing or preventing terrorism? Explain your answer. If the United States is NOT making progress, what would have to happen to make the efforts against terrorism more effective?
|
|
Two vectors ever be equal to the magnitude of the sum
: Can the sum of the magnitude of two vectors ever be equal to the magnitude of the sum of those two vectors? In math this is written as, 'Is |A? | + |B? | = |A? + B? |?' If your answer is no, then explain why. If your answer is yes, the provide an exa..
|
|
A causal explanation offered for further investigation or te
: According to the textbook, a hypothesis is "a causal explanation offered for further investigation or testing." The book provides several methods for testing the quality of a hypothesis. Choose one of the statements below and use one or more of the t..
|
|
How has event changed behaviors within the country attacked
: Describe the event and speculate about the purpose of the attack (from the perpetrators' point of view). How has the event changed behaviors or policies within the country attacked or its neighbors and allies?
|
|
What factors are important for pricing options
: According to the Black-Scholes option pricing model, what factors are important for pricing options?
|
|
A constant friction force present between the floor
: Mary applies a force of 79N to push a box with an acceleration of 0.47 m/s2.When she increases the pushing force to85N,the box's acceleration changes to 0.73 m/s2. There is a constant friction force present between the floor
|
|
What is the mean and standard deviation
: What is the mean and standard deviation (SD) for preoperative T score for CVLT Acquisition - distribution of scores for the postoperative CVLT Retrieval T scores is normal, the middle 68% of the patients had T scores between what two values?
|
|
What are some faster ways to accomplish data collection
: Data collection takes a lot of time. Therefore, it is not worth the time and trouble. What do you think? What are some faster ways to accomplish data collection
|
|
Write a speech outline for a global and national problem
: Write a persuasive speech outline for a global, national, regional, state or local problem that apparently exists because humans in general or a specific group of humans are neglecting their duty.
|