What is the value of the macquarie group call

Assignment Help Finance Basics
Reference no: EM133001158

Macquarie Group's stock price is $160 and could halve or double in each six month period (equivalent to a standard deviation of 98%). A one-year call option on the Macquarie Group has an exercise price of $120. The interest rate is 3.5% a year.

a. What is the value of the Macquarie Group's call?

b. Suppose that you have an option that allows you to sell Macquarie Group stock in month 6 for $120 or to buy it in month 12 for $120. What is the value of this option?

Reference no: EM133001158

Questions Cloud

Interpret an upward sloping yield curve : -Discuss how you might interpret an upward sloping yield curve. Flat yield curve. Downward sloping yield curve. (EACH THEORY)
Explain net present value at the required rate of return : Initial fixed asset cost of $2.168 million which will be depreciated straight-line to a zero book value over the 10-year life of the project.
How much of the overhead cost in july was maintenance : Estimate how much of the $202,000 of overhead cost in July was maintenance cost. To do this, first determine how much of the $202,000 consisted
What is the net present value of expansion project : Expects operating cash flows of $50,000 a year for nine years as a result. This expansion requires $36,500 in new fixed assets. These assets will be worthless a
What is the value of the macquarie group call : Macquarie Group's stock price is $160 and could halve or double in each six month period (equivalent to a standard deviation of 98%). A one-year call option on
What is the future value of a 5-year ordinary annuity : Future value of an annuity. What is the future value of a 5-year ordinary annuity with annual payments of $200, evaluated at a 15 percent interest rate?
What journal entry johnson record to recognize bad debt : What journal entry should Johnson record to recognize bad debt expense for 2021? Johnson Company calculates its allowance for uncollectible accounts
Find the effective annual cost of trade credit : In this question we will compute the effective annual cost of trade credit. Suppose a firm is offered the following the terms are 1.5/8 net 30. Find he effectiv
What is the net present value of the project : A company is considering a project with an initial cost of $8.4 million. The project will produce cash inflows of $1.9 million per year for 6 years.

Reviews

Write a Review

Finance Basics Questions & Answers

  Calculate tater and pepper''s 2012 ebit.

Tater and Pepper Corp. reported free cash flows for 2012 of 309.1 million and investment in operating capital of 22.1 million. Tater and Pepper incurred 13.6 million in depreciation expense and paid 28.9 million in taxes on EBIT in 2012. Calculate Ta..

  Determine the value of the erosion

A Corporation currently sells 300 Class A spas, 450 Class C Spas and 200 deluxe model spas each year. The company is planning adding a mid class spa and expects that if it does it can sell 375 of them.

  What are the advantages for a company

What are the advantages for a company to list its shares on the stock exchange?

  Thereafter you expect dividends to grow at the rate of 6 a

you believe that the non-stick gum factory will pay a dividend of 2 on its common stock next year. thereafter you

  What is the formula for the value at time

A stock S with price at time t pays no dividends. If you own shares of S suppose that you can make some extra money by lending them to someone with the agreemen

  Researchers measured the blood pressure

A randomized, controlled experiment investigated this question using a random sample of 540 adult males as subjects. At the beginning of the study, researchers measured the blood pressure of all the subjects. Each subject was given a regular or de..

  Complete a presentation on disease

The disease that is chosen must affect the organ systems that we are covering on this sequence - disease and the complete a presentation on that disease.

  Explain the time horizons

Explain the time horizons used to analyze and measure unexpected changes in exchange rates.

  The mcgregor whisky company is proposing to market diet

the mcgregor whisky company is proposing to market diet scotch. the product will first be test-marketed for two years

  Chemtec marginal tax rate on earnings

Assume that Chemtec's marginal tax rate on earnings is 35%. Assuming that all of these cash flow occur at the end of the first year, what is the first year's free cash flow?

  What is the highest possible beta estimate for the project

What is the highest possible beta estimate for the project before its NPV becomes negative?

  Becoming a global business language

Accounting is becoming a global business language. Provide some evidence of this assertion. What are some of the implications of this trend?

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