What is the value of the derivative

Assignment Help Finance Basics
Reference no: EM132133083

A stock price is currently $20, and at the end of 3 months it will increase or decrease by 10%. The risk free rate is 5% per year (continuous compounding). Assume that ST is the price at the end of 3 months. what is the value of the derivative that pays off ln(ST) at this time?

Reference no: EM132133083

Questions Cloud

What amount is allowed as a deduction for the decline : What amount is allowed as a deduction for the decline in value of the above items purchased during the current income year using both methods available
Set up an amortization schedule : Set up an amortization schedule for a $15,000 loan to be repaid in equal installments at the end of each of the next 4 years. The interest rate is 10%.
Find the present value of the following ordinary annuities : Find the present value of the following ordinary annuities (See hint for Problems 4-9):
What is the future value : What is the future value of a 9%, 5 year annuity due that pays 300 each year?
What is the value of the derivative : Assume that ST is the price at the end of 3 months. what is the value of the derivative that pays off ln(ST) at this time?
What is the accumulated sum : What is the accumulated sum of the following stream of payments?
What is the price of a par value bond : What is the price of a $1,000 par value bond with an 8% coupon rate paid semiannually, if the bond is priced to yield 4% and it has 15 years to maturity?
Low liability insurance limits : "Many drivers operate vehicles either without insurance or with very low liability insurance limits. They often are in no position to pay for the damage
Calculate the forecasted utility cost : Blacken Company manufactures motorcycles. Using a regression program, the forecasted utility cost at 2,300 machine hours (rounded to the nearest dollar) is

Reviews

Write a Review

Finance Basics Questions & Answers

  Time value of money-future and present value

Clearly and concisely describe what is meant by the time value of money and what the terms future value and present value represent. Explain.

  Qualities of effective corporate governance

Evaluate the qualities of effective corporate governance. Use technology and information resources to research issues in advanced financial management.

  What is the cost of the preferred stock

The stock has a 12% annual dividend and an $80 par value and was sold at $83.20 per share. In addition, flotation costs of $4.80 per share were paid. Calculate the cost of the preferred stock.

  Expected return on the portfolio

You own a portfolio that has $2,150 invested in Stock A and $3,050 invested in Stock B. If the expected returns on these stocks are 8 percent and 16 percent, respectively, what is the expected return on the portfolio? (Do not round your intermedia..

  Standard deviation of best buy returns

What was the average return for Best Buy during this five year period? What is the standard deviation of Best Buy's returns for this period?

  What is the asset beta

The correlation between the market and asset A is 0.75, the covariance between the market and asset A is 0.045, and the standard deviation of asset A is 0.20.

  Which the latest developments in health reform

1. Describe at least two (2) ways in which the latest developments in health reform (i.e., increased transparency to ensure fulfillment of charitable missions) will affect nonprofit health care organizations.

  Compute the payback period for a project with the following

compute the payback period for a project with the following cash flows if the companys discount rate is 12.initial

  Enter the workforce for the first time

Jane is 45 years old and would like to retire in 15 years. Jane's husband passed away years ago so she is receiving a widow's pension. She had always been a stay at home Mom like her own Mother, but after her husband passed away; she realized that mo..

  Vision for organization

Propose your long-term (3 year) vision for your organization (Amazon). Which cultural issues are conducive to the changes.

  Scheuer enterprises consists of a beta of 110 the real

scheuer enterprises has a beta of 1.10 the real risk-free rate is 2.00 investors expect a 3.00 future inflation rate

  The cash cycle

Indicate the effect of the following on the cash cycle: Accounts payable period goes up Decrease Increase No change 1 points QUESTION 2 Indicate the effect of the following on the operating cycle: Customers take longer to make the payment No change I..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd