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Consider the stock XYZ, which pays no dividends. It is currently trading at $14.93 per share. The following questions refer to options and futures on this stock that expire on 3/15/2018. You may assume that this is exactly 3 months or 0.25 years from now in calculation.
a. Zero-coupon T-bills expiring on 3/15/2018 are currently selling for 99.5013. what is the risk-free spot interest rate?
b. What is the future price of XYZ.
c. A call with a strike equal to the value found in part(b) is selling for $1.20. What is the price of a put with the same strike?
d. You want to make a synthetic short future with a contract price of $16/share. How can you do this using only puts and calls?
e. How much do you pay, or are you paid, at initiation to create this synthetic future?
Employ an arbitrage argument to explain why an American option is always worth at least as much as: (a) a European option on the same asset with the same strike price and exercise date, and (b) its intrinsic value. For both parts (a) and (b) clearly ..
If the dividend per share expected during the coming year, D1, is $3.00 and g = 4%, at what price should a share sell?
You have a $1000 portfolio that is invested in stocks A and B plus a risk-free asset. $175 is invested in stock A.
Jonathan is considering investing in security A that has offered average annual return of 14% and standard deviation of 18%
What is the long-run average volatility and what is the equation describing the way that the variance rate reverts to its long-run average?
Your firm needs a machine which costs $240,000, and requires $45,000 in maintenance for each year of its 5 year life. After 5 years, this machine will be replaced. The machine falls into the MACRS 5-year class life category. Assume a tax rate of 35% ..
When might the constant growth model not be used? Explain characteristics of preferred stock. How stock is valued if the constant growth model cannot be used.
she had legitimate checks written to cover her monthly bills that arenow in excess of the available checking account balance due to the theft?
Project cash flow Colsen Communications is trying to estimate first-year cash flow (at Year 1) for proposed project. What is project's cash flow for first year.
A firm with total costs of $1,400,000 and sales of $2,000,000 merges with a smaller firm with total costs of $700,000 and sales of $1,200,000 million. Calculate the difference in average cost of production expressed in percent
Bryson? Industries's free cash flow to its equity holders? (FCFE) was ?$50 million in its most recent fiscal year that just ended.? Bryson's FCFE is expected to grow steadily at 3?% per year in perpetuity. Divide the total value of equity by the tota..
Which of the following accounts has the highest? EAR?
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