Reference no: EM131178230
1. You are considering buying options on the stock of the Wallace & Fischer Corporation, a producer of jet aircraft engine parts. The company’s stock is currently trading at $40 per share and historically has had a volatility measure (standard deviation) of 30%. The options you are considering buying have a strike (exercise) price of $44 and run for 6 months (180 days). If the risk-free rate currently stands at 9%, and the underlying stock for the Wallace & Fischer Corporation is offering a dividend yield of 1.25%, determine the Black-Scholes-Merton model values for: N (d1), N (d2), N (- d1), and N (- d2).
2. Given the information in question four (4) above and your calculated values for N (d1), N (d2), N (- d1), and N (- d2), determine: a. The price (premium) of a call option (Ct) for Wallace & Fischer stock using the Black-Scholes-Merton model. b. How much of the call’s value is composed of intrinsic value? How much of the call’s value is composed of a time premium? (Explain how you determined these values.)
3. Given the information in question four (4) above and your calculated values for N (d1), N (d2), N (- d1), and N (- d2), determine: a. The price (premium) of a put option (Pt) on Wallace & Fischer stock using the Black-Scholes-Merton model. (Use the put/call parity model to confirm your answer.) b. How much of the put’s value (price) is composed of intrinsic value? How much of the put’s value is composed of a time premium? (Explain how you determined these values.)
|
Should we reduce healthcare costs
: The greatest increase in government spending is " entitlement" spending which represents mostly medicare and medicaid. The national goal is to reduce healthcare costs. Should we reduce healthcare costs? why or why not and how?
|
|
Value of an one-year european put option
: The Citco's current stock price is $35 at t=0. At the end of the year (t=1), the stock price is expected to either increase to $40 or decrease to $30. The risk-free rate is 6% per annum with continuous compounding. What is the value of an one-year..
|
|
Build a small network using three switches
: ITNE3008 - Advanced Switching Build a small network using three switches and one router and one switch will run as a distribution layer switch, the other two will run as access layer switches
|
|
Provide theoretical foundation for conducting research
: What are 3-4 types of statistical methods can be used to analyze the data? Explain in detail. What are the advantages and disadvantages of each type of statistical data analysis method? Explain. Which method do you prefer to use most? Why? Please ..
|
|
Determine the black-scholes-merton model values for
: You are considering buying options on the stock of the Wallace & Fischer Corporation, a producer of jet aircraft engine parts. The company’s stock is currently trading at $40 per share and historically has had a volatility measure (standard deviation..
|
|
Payroll tax-firms or workers
: The current payroll tax is 7.65% on both employers and employees (as of 2013). Who do you think bears the economic burden of this payroll tax-firms or workers? Why? Using the tax incidence approach, support your answers using economic principles.
|
|
Determine the horizontal displacement dh of joint a
: A statically indeterminate truss consisting of 12 bars made of the same material and having the same cross section is shown in the figure. A vertical force P acts at joint A. By using the reciprocal-displacement theorem, determine the horizontal d..
|
|
Evaluate the level of sox regulations that applies
: Evaluate the level of SOX regulations that applies to for-profit and not-for-profit health care organizations, indicating whether or not mandating SOX requirements for non-profits might reduce fraud.
|
|
Compute the predetermined rate
: Compute the predetermined rate assuming that Marine Components uses machine-hours to apply overhead. (Round your answer to 2 decimal places.)
|