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The stock price of Heavy Metal (HM) changes only once a month: either it goes up by 20% or it falls by 16%. Its price now is $46. The interest rate is 9% per year, or about 0.75% per month.
a. What is the value of a one-month call option with an exercise price of $46? (Round your intermediate calculations and final answer to 2 decimal places.)
b. What is the option delta? (Round your intermediate calculations and final answer to 2 decimal places.)
You just won the lottery and want to give some money to a good cause. Because you have enjoyed this class so much, especially the tests, you decide to give $10,000 to HCC to fund student scholarships. HCC is a non-profit educational institution. What..
Drugs 'R Us operates a mail-order pharmaceutical business on the West Coast. The firm receives an average of $642,000 in payments per day. On average, it takes 7 days for the firm to receive payment, from the time customers mail their checks to the t..
Coiner Clothes Inc. is considering the replacement of its old, fully depreciated knitting machine. Two new models are available: (a) Machine 190-3, which has a cost of $190,000, a 3-year expected life, and after-tax cash flows (labor savings and depr..
Skillet Industries has a debt–equity ratio of 1.4. Its WACC is 9.8 percent, and its cost of debt is 7.5 percent. The corporate tax rate is 35 percent. What is the company’s cost of equity capital? What would the cost of equity be if the debt–equity r..
Your company (Apple Inc) is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique. Your company (Apple Inc) is considering the construction of a new building. The building will have an ..
Compute the cost of capital for the firm for the following-A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.9%. Interest payments are $54.50. The bonds have a current market value of $1,120 and will mature ..
A company has dividend of $2 per share, earnings per share of $8 and plowback ratio of 75%. What is the payout ratio?
questiona describe concept of future value and present value. b natasha has graduated from high school and has
The common stock of the Tangerine Tube Company is currently selling for $75 a share. Under the terms of a rights offering, the present stockholders will be able to purchase a share at $60 a share for each 5 shares of common held. What is the theoreti..
Suppose the yield on short-term government securities (perceived to be risk-free) is about 4%. Suppose also that the expected return required by the market for a portfolio with a beta of 1 is 12%. According to the capital asset pricing model: What is..
You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.35, and the total portfolio is exactly as risky as the market, what must the beta be for the other stock in your portfolio?
As part of your financial planning you wish to purchase q new car exactly 7 years from today . The car you wish to purchase costs 14000 today and your research indicates that it's price will increase by 3% to 6% per year over the next 7 years.
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