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For input values, let's assume that the underlying bond matures on 15 September, 2029 the bond's yield is y = 3.0%, the option's settlement date is 20 October, 2020, and the option's maturity date is 23 March, 2022. We'll assume that the term structure is flat with y = the bond's yield. Also, assume the (cash) exercise price is X = 100. NOTE: To get a flat term structure, set a1 = a2 = a3 = 0, a4 = y. You will need this fact when using some of the other spreadsheets below. For the bond's volatility, assume that y = 0.15 (see cell M5): the bond's volatility, P, is given by P = yyMD. (The spreadsheet calculates this automatically in cell G5; the modified duration, MD, is calculated in cell L5. The bond's cash price is also calculated automatically once you enter the bond's coupon rate and yield.)
Problem 1: What is the price of the European call if we assume that the bond's coupon rate is 2.0%? What is the price of the American call? Is there an early exercise premium for the American call? If so, what is the early exercise premium? The European call option corresponding to which coupon payment has the maximum price? What is the Delta of the above American call option (assuming you hedge using the underlying bond)?
Arness Woodcrafters sells $246,800 of receivables to Commercial Factors, Inc. on a with recourse basis. Commercial assesses a finance charge of 6% and retains an amount equal to 5% of accounts receivable. Arness estimates the fair value of the recour..
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Masterson Company acquires a 80% interest in its subsidiary for a purchase price of $620,800. The excess of the purchase price over the book value of the subsidiary's Stockholders' Equity is allocated to a building (in PPE, net) that the parent belie..
heres the questionchoose an item that you would like to manufacture. you do not actually need to manufacture something
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