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You own a one-year call option to buy one acre of Los Angeles real estate. The exercise price is $2.04 million, and the current, appraised market value of the land is $1.74 million. The land is currently used as a parking lot, generating just enough money to cover real estate taxes. The annual standard deviation is 14% and the interest rate 10%. Suppose the land is occupied by a warehouse generating rents of $170,000 after real estate taxes and all other out-of-pocket costs. The present value of the land plus warehouse is again $1.74 million. You have a European call option. What is it worth of the European call option? (Enter your answer in millions. Do not round intermediate calculations. Round your answer to 4 decimal places.)
Call value $
Storico Co just paid a dividend of $2.65 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent divide..
Corcoran Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for $23,000, which will generate cash flows of $8,000 at the end of each of the next 6 years.
A bond with a call provision is worth more to investors than a bond without a call provision. Preferred stock is less risky than common stock, but more risky than debt.
The Toronto Blue Jays are a major-league baseball team located in Toronto, Ontario. Explain the currency risk faced by the Blue Jays and how the team can manage this risk?
Suppose you are considering buying a new car. You are going to make monthly payments (at the end of each month) on a loan of $33,000 for five years. If the annual percentage rate is 7.5% what is your monthly payment? Based on your payment, what is th..
The concept of reversion and remainder is not there in most countries. By having such a system, the property value goes up. Why does the value goes up?
You sell short 300 shares of Microsoft which are currently selling at $30 per share. You post the 50% margin required on the short sale. The broker requires a 30% maintenance margin.
ABC Corp. issued a 12 percent, 20 year coupon rate bond 5 years ago. Interest rates are now 8 percent. The par value of the bond is $1,000. Based on semi-annual analysis, what is the current price of the bond?
Suppose that a debt of $2200 with interest at i^(4) = 0.10 is amortized by payments of $500 at the end of each quarter for as long as possible. How many payments are made? What is the last payment? What is the total interest paid?
The water cooler has become a symbol in business life. Like any common gathering place in an office slightly removed from the cubicles and desks, the water cooler is a place to share information, both casual and vital, and to build networks with coll..
Explain why the researchers exhibited similarities and differences in how they defined and operationalized variables while providing a theoretical framework
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.88 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. If the tax rate is 35 percent..
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