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Problem I. The current price of a stock is $60. The one-year call option on the stock at a strike of $60 is trading at $10. If the one-year rate of interest is 10%, is the call price free from arbitrage, assuming that the stock pays no dividends? What if the stock pays a dividend of $5 one day before the maturity of the option?
Problem II. The current price of ABC stock is $50. The term structure of interest rates (continuously compounded) is flat at 10%. What is the six-month forward price of the stock? Denote this as F. The six-month call price at strike F is equal to $8. The six-month put price at strike F is equal to $7. Explain why there is arbitrage opportunity given these prices.
If the company accepts this offer and shuts down production of valves, What is the incremental savings of buying the valves
September 8 Purchase painting equipment for $13,500 cash. Post each transaction to T-accounts and calculate the ending balance for each account
Coil Welding Corporation sells and services pipe welding equipment in California. Journalize the entries to record the transactions
at the end of each month for the next ten years you will receive cash flows of 50. if the discount rate is 7.2
Core Company provided the following relating to the most recent month (August 31, 2022) of operations, Prepare cost of goods sold section of income statement
Residual value of 2000. Yacht was used 6 months of the year. What is depreciation expense per month based on straight line
Suppose you are one of Williams' creditors. Referring to the statement of cash flows, evaluate Williams' ability to repay its creditors
Omen corporation's books disclosed the following data for the current year: Gross income $300,000, What is Omen's Corporations taxable income for current year
Handler Company is an established manufacturer of equipment used in the construction industry. What is the transaction price
Complete the manufacturing overhead budget and the manufacturing overhead rate with variable and fixed manufacturing overhead
selbe inc. is a retailer operating in edmonton alberta. selbe uses the perpetual inventory method. all sales returns
refer to the original data. assume again that the company sold 18000 units last year. the president does not want to
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