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Common stock of a company is selling today for $53.69. Call options on the company expiring in 1-month with strike prices of $49 and $56 are selling for $4.80 and $0.36, respectively.
a. How would you form (i.e., which option would you be long and which option would you be short) a bull call spread with the two options? What is the cost of each spread?
A particular stock sells for $30. The stock's beta is 1.25, the risk-free rate is 4% and the expected return on the market portfolio is 10%.
A company is evaluating two different irrigation system options. An underground automatic irrigation system will cost $9.2 million to install and $80,000 pre-tax annually to operate. It will not have to be replaced for 20 years. The firm leases its l..
What percentage of the merger gain will be captured by firm B's shareholders?
You own a portfolio equally invested in a risk-free asset and a risky stock. If the beta (B) of the overall portfolio...… what is the beta for the risky stock in your portfolio?
Why is time value analysis important to healthcare financial management? - Why is there a "time value" to money?
Kelsey Drums, Inc., is a well-established supplier of fine percussion instruments to orchestras all over the United States. The company's class A common stock has paid a dividend of $5 per share per year for the last 15 years. Management expects to c..
Ten years ago your father purchased for you a 25-year $1,000 bond with a coupon rate of 7%. You now wish to sell the bond and learn that the current discount rate to use is 5%. What price should you receive for the bond?
You invest $25,000 now and receive $3,000 per year for 25 years starting at the end of the first year. What is the payback period in whole number years for this investment? In other words, in what year do you break even on this investment? Use i = 8%..
Meacham Corporation wants to issue bonds with a 9% coupon rate, a face value of $1,000, and 12 years to maturity. Meacham estimates that the bonds will sell for $1,090 with issuing (flotation) costs equal $15 per bond—this reflects an 8% before tax c..
DDD uses constant 12% WACC as discount rate while evaluating all its domestic projects. What do you foresee happening with its WACC in the next five years?
Restrictions on dividend payments based on the liquidity postion of the firm. Based on your understanding of constraints on dividend payments, identify the type of constraint this condition represents. Assume that all other factors held constant. IN ..
Suppose that the return on a risk-free security is 5 percent. The expected return on the market portfolio is 16 percent and the volatility of the market portfolio is 22 percent What is the volatility of the risk-free security? What is the correlation..
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