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Consider a one period two-state case in which XYZ stock is trading at S0= $35 and has ?u of 1.05 and d ?of 1/1.05, and for which the period risk free rate is 2%.
a. Using the BOPM, deterine the equilibrium price of an XYZ 35 European call option expiring at the end of the period.
b. Explain what an arbitrageur would do if the XYZ European call option was priced at $1.35. Show what the arbitrageur's cash flow would be when he closed.
c. Explain what an arbitrageur would do if the XYZ 35 European call was priced at $1.10. Show what the arbitrageur's cash flow would be at expiration when he closed.
Assuming no direct factory overhead costs (i.e., inventory carry costs) and $3 million dollars in combined promotion and sales budget, the Cid product manager wishes to achieve a product contribution margin of 35%. Given their product currently is pr..
Suppose you invest $2000 today and recieve $10,000 in five years. What is the internal rate of return of this opporunity? What is the future value of 10000 with an interest rate of 16% and one annual period of compounding? what is the internal rate ..
In the Blue Wave Electronics factory, workers use diagnostic machinery to check that parts are up to certain standards. Workers are paid on the graduated piecework scale shown below for each hard drive that they check. If Henry checks 340 drives on M..
The WeLoveBondValuation Company needs to estimate the cost of debt in their WACC calculation. The 10-year bond issue would have $1,000 par value, 5% coupon rate, and pay interest semiannually. what is the after-tax cost of debt to be used in the WACC..
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Compute the price of a 6.25 percent coupon bond with 15 years left to maturity and a market interest rate of 5 percent. The bond was sold at a par value of $1000. Assuming the interest payments are semi-annual is this a discount or premium bond?
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QRS Inc. has net income of $35,000 total assets of 435,000, total liabilities of 218,000, and a price-book ratio of 3.82. There are 50,000 shares of stock outstsnading. What is the firm's price-earnings ration?
It is now Januery 1, 2010 and Bill Nilas is considering the purchase of an outstanding $1,000 par bond that was issued on Januery 1, 2006. It has a 6 percent annual coupon and had a 10-year original maturity. It has 5 years of call protection (from t..
The rule of choosing the final proposal is simple. First, Z is the person to determine who (either X or Y) is the proposal raiser.
Define the terms Demand deposits, Compensating balance, Disbursement float, Deposit float, Lockbox, Wire transfer, Depository transfer check, Zero-balance system, Draft and Automated clearinghouse.
You buy a share of The Ludwig Corporation stock for $21.40. You expect it to pay dividends of $1.07, $1.1449, and $1.2250 in Years 1, 2, and 3, respectively, and you expect to sell it at a price of $26.22 at the end of 3 years. Calculate the growth r..
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