Calculate the minimum price sell for in a rational market, Financial Management

Assignment Help:

Suppose spot Swiss franc is $0.7000 and the six-month forward rate is $0.6950.  What is the minimum price which a six-month American call option along with a striking price of $0.6800 should sell for in a rational market? Suppose the annualized six-month Eurodollar rate is 3½ percent.

Solution:

         Ca ³Max[(70 - 68), (69.50 - 68)/(1.0175), 0]

             ³Max[ 2, 1.47, 0] = 2 cents


Related Discussions:- Calculate the minimum price sell for in a rational market

Calculate the standard deviation of a portfolio , Aquaman stock has exhibit...

Aquaman stock has exhibited a standard deviation in returns of 0.7, whereas Green Lantern stock has exhibited a standard deviation of 0.8. The correlation coefficient between the

Determine the return on invested capital, 1.      Consider the following tw...

1.      Consider the following two investment alternatives   Net cash flow   End of year Machine A Machine

Explain about the equity claims in the financial security, Explain about th...

Explain about the equity claims in the financial security. Equity classifies claims to shares into the net income and assets of a firm, and they do not contain a maturity date.

Advantage and disadvantage of aggressive working capital, What are the adva...

What are the advantages and disadvantages of the aggressive working capital financing approach? An aggressive working capital financing approach generally results in a lower cost

Scenario analysis for a portfolio manager, A portfolio manager would ...

A portfolio manager would never prefer to make investment decision based on just one set of assumptions. Instead, he would evaluate the outcome of the selected st

Implementing systems effectively, Implementing Systems Effectively: Muc...

Implementing Systems Effectively: Much of the accounting process has been taken over by office automation systems. Whereas once the vast majority of bookkeeping and reporting t

Accrued dividend, It is an accounting term which refers to the balance shee...

It is an accounting term which refers to the balance sheet item that accounts for dividends that have been confirmed but not yet given to shareholders. Accrued dividends are taken

Compare and contrast the potential liability, Compare and contrast the pote...

Compare and contrast the potential liability of owners of proprietorships, partnerships (general partners), and corporations. The sole proprietor has limitless liability for ma

Enhance or maintain its image and reputation, a) Marketing might be vital t...

a) Marketing might be vital to an organisation such as WHSG for several reasons, including: • The need to be a focus for the right kind of students to the school (there are riva

Analyse financial statements - strength of business, Learning outcome to be...

Learning outcome to be assessed: analyse financial statements to make decisions on the strength and adaptability of a business. A numerical analysis of the financial statements of

Write Your Message!

Captcha
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