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Consider a 6-month European put on GOOG with a strike price of $650. GOOG spot price is $725 and its volatility is 25%. The stock is not expected to pay any dividend. The risk-free rate is 4%.
(a) Use Black-Scholes-Merton (BSM) model to price this put option.
(b) What is the put delta? If an investor with a short position decides to delta hedge, what would the net cash flow be?
(c) Without using BSM model, what are the 6-month 650-strike straddle price and its delta?
The initial cost of a federal highway project is $4 million. The road will require maintained at a cost of $50,000 a year during its 20 year life. If benefits of $300,000 a year have been identified, the B/C value at an interest rate of 6% a year is?
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Consider the following timeline detailing a stream of cash flows: If the current market rate of interest is 8%, then the present value of this stream of cash flows is closest to:
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Kurt's Kabinets is looking at a project that will require $80,000 in fixed assets and another $20,000 in net working capital. The project is expected to produce sales of $110,000 with associated costs of $70,000. The project has a 4-year life. The co..
Norma’s Cat Food of Shell Knob ships cat food throughout the country. Norma has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two and one-half days. If the com..
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