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1 Explain the difference between a forward start option and a package.
Outperformance certificates are offered to investors by many European banks as a way of investing in a company's stock. The initial investment equals to the stock price, S0. If the stock price goes up between time 0 and T, the investor gains k times the increase at time T, where k is, the stock price used to calculate the gain at time T is capped at some maximum level M. If the stock price goes down, the investor's loss is equal to the decrease. The investor does not receive dividends.
a) Show that an outperformance certificate is a package.
b) Calculate the value of a one-year outperformance certificate when the stock price is 50 pounds, k=1.5, M=68 pounds, the risk-free rate is 4.5%, and the stock price volatility is 23%. Dividends equal to 0,5 pounds are expected in 2 months, 5 months, 8 months, and 11 months.
In a floating rate security, the coupon rate changes periodically as per the reference rate. The yield to maturity of floating rate securities cannot be calculated as
Q. Disadvantage or redundancy of excessive working capital? Excessive working capital means idle funds which earns no profit for the business operation it should have nighters
What are number of factors that influence the shape of the yield curve? There are some of factors which influence the shape of the yield curve as follows: (1) Expectations
What is rectification of errors? List and explain the stages where the errors are deducted for rectification.
This case provides the opportunity to match financing alternatives with the needs of different companies. It allows the reader to demonstrate a familiarity with different types of
What is a marginal cost of capital schedule (MCC)? Is the schedule all the time a horizontal line? Explain. The MCC schedule is a graphic depiction of the weighted average cost
a) Define monetary policy, and discuss the operation of monetary policy in the United States post-GFC.
What is the Tolerable error In addition to looking at material differences individually the auditor must list all the differences (material or not) and consider in total wheth
Purpose of research: The aims of this research are to examine the effectiveness of speculation on efficiency of Petrochemical sector in Saudi Arabia financial market"TADAWUL".
Investors are always interested in estimating the price sensitivity of a bond to change in market interest rates. Let us study how prices change both in terms of
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