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Today’s price of a non-dividend paying stock is $60. Use a two-step tree to value an American put option on the stock with a strike price of $50 that expires in 12 months. Each step is 6 months, the risk free rate is 10% per annum, and the volatility is 15%. Assume that the option is written on 100 shares of stock.
What is the option price today?
How would you hedge a position where you sell the put option today?
Derive the price for next year. What are 4 important variables that affect P/E ratios?
What is the 1-year interest rate that is expected for Year 2? The difference is due to the fact that there is no liquidity risk premium.
He thinks that he will need P500.000 for his wedding budget. What is the minimum annual rate of his investment to achieve this target?
Calculate the weekly values in your margin account. The initial margin is $ 650 per contract and the maintenance margin is $ 400. Calculate your realized return for the entire period. Assume that you offset your futures position on December 3 at the ..
Calculate the same assuming semiannual and quarterly compounding and compare your results.
As reported by the Bureau of Labor Statistics, the CPI for Airfare in 2263 was 583.9 (using a base year of 1914 = 100). The CPI for Airfare in 2264 was 615.8. Based on this data, what was the inflation rate of airfare from 2263 to 2264?
For the given cash flows, suppose the firm uses the NPV decision rule. Year Cash Flow 0 –$ 153,000 1 78,000 2 67,000 3 49,000 Requirement 1: At a required return of 9 percent, what is the NPV of the project?
Assuming monthly compounding, what should the forward interest rate of a three-month T-bill be if it is to be delivered at the end of three months? What if it is to be delivered at the end of six months?
Find the degree of operating leverage (DOL) for the following firm through its change in sale (S) and operating income (OY) between years 1 and 2.
Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish an immediate presence in the area, the company is considering the purchase of the privately held Joe’s Party Supply. Happy Times currently has debt outstand..
Many of the disadvantages from using the static measures of liquidity can be remedied by using the CCC approach to analyzing liquidity With this approach, company liquidity is measured using the equation? How is this true and Why?
Suppose that US Treasury Bills have seven days left until maturity, have a face value of $75,650, and have a quoted YTM of 5%. What would be a reasonable annualized risk-free rate that could be derived from this US Treasury Bill?
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