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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.
What is the Exit strategy for equity stake venture Exit strategy for equity stake venture capitalists and other financiers may include: (i) Selling their shares to the publ
Principles of Good Regulation While performing its functions, the FSA needs to take into account certain matters which are termed the ‘principles of good regulation'. The matte
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What are the types of Inventory cost? Explain the elements of inventory cost also. Types: 1. Ordering cost 2. Holding cost Elements: 1. Unit cost 2. Reordering
Expected volatility is a major factor that affects the value of an option. Expected volatility of an option on bond is referred to as 'expected yield volatility'. The
As of November 1, 1999, the exchange rate in between the Brazilian real and U.S. dollar is R$1.95/$. The agreement forecast for the U.S. and Brazil inflation rates for the next 1-y
Ocean Blue Vessels Ltd is a real Liner firm whose capital structure consists of debt, preference shares and equity shares. The company plans to raise further capital for its expans
How to finance the exit of the financiers The company would have to decide how to finance the exit of the financiers. Considerations comprise: (i) Selling shares to the pub
APPLICABILIYI OF THE OPERETING CYCLE
Q. Show the Disadvantages of adjusted discount rate? (1) The risk premium rates resolute under this method are arbitrary. Therefore this method mayn't give objective results.
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