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1. Consider a binomial model. The current value of a stock is $50 and the strike price for a call option is $52. The up factor is equal to 1.15 and the down factor is equal to 0.90. The risk-free rate is 3%. What is the value of the call option?
2. The S&P 500 index currently stands at 2,700 and has a volatility of 11%. The risk-free interest rate is 2% and the dividend yield on the index is 4%.
a) Use Black-Scholes to value a three-month European put option with a strike price of 2,500.
b) Use Black-Scholes to value a one-year European call option with a strike price of 3,000.
Calculate the value of the tax shield if the kiln is currently expensed and if it is treated as a capital investment.
Cost of common stock equity- CAPM. J&M Corporation stock has a beta, b, of 0.8. The risk-free rate is 7% and the market return is 13%. Determine the risk premium on J&M common stock. Determien the required retrun that J&M common stock should provide.
Consider an option on a non-dividend-paying stock when the stock price is $48, the strike price is $45, the risk-free interest rate is 6% per annum, the volatility is 20% per annum, and the time to maturity is five months. Create a delta neutral port..
The tax rate is 38 percent. What is the company's target debt-equity ratio?
What is your effective annual interest rate on this arrangement if you do not borrow any money on this credit line during the year?
What annual rate of return is earned on a $1,000 investment when it grows to $1,500 in four years?
Talbot Industries is considerinng launching a new product. The new manufaturing equipment will cost $17 millioon., and production and sales will rquire an initial $5 million investment in net operating working capital. What is the initial investment ..
Growing at the same rate as inflation and thus enabling her to maintain a constant standard of living?
What would the price have to be at the end of year 2 in order to earn a 20 percent IRR on equity? (Show and explain all necessary calculations.)
Assume Enterprise Inc. Sells special widgets per week. They are able to sell 400 widgets per week. Assuming the carrying cost per unit is $2.00. What is the total carrying cost per week? Assume another company sells common widgets (and assume the sal..
An investor wants to save for five years for a down payment on a house. She deposits $200 per month into a savings account paying 7% compounded monthly. At the end of the five years, she places the balance of the savings account as a down payment on ..
You have been given a portfolio of $ 300 million to manage and invest. In the pension and retirement funds and long-term prospects, to a risk moderate loss of capital and required an annual income of 9%. Analysis of the business strategy Accounting A..
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