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1. Explain how an aggressive bear spread can be created using put options.
2. Suppose that put options on a stock with strike prices $30 and $35 cost $4 and $7, respectively. How can the options be used to create (a) a bull spread and (b) a bear spread? Construct a table that shows the profit and payoff for both spreads.
3. Use put-call parity to show that the cost of a butterfly spread created from European puts is identical to the cost of a butterfly spread created from European calls.
Marshall's purchased a corner lot five years ago at a cost of $498,000 and then spent $63,500 on grading and drainage so the lot could be used for storing outdoor inventory. The lot was recently appraised at $610,000. The company now wants to build a..
Hardy Lumber has a capital structure which includes bonds, preferred stock, and common stock. Which of the following rights have most likely been granted to the preferred shareholders?
You have the following information. In 10 years and in 15 years you will send your two nephews to attend school. The tuition now is $10,000 but will grow at 7% per annum. You will retire in 40 years and be in retirement 35 years. You will need $60,00..
Sample Statement of Cash Flows. The Statement of Cash Flows on page presents how changes in Balance Sheet accounts will affect a company’s cash balance. Refer to that information and discuss how an increase in your company's accounts payable from one..
Determine the following Amount of safety stock, in units, Average inventory and annual carrying costs and Reorder point.
Greta, an elderly investor, has a degree of risk aversion of A = 5 when applied to return on wealth over a 3-year horizon. She is pondering two portfolios, the S&P 500 and a hedge fund, as well as a number of 3-year strategies. If the correlation coe..
A stock is trading at $65 per share. The stock is expected to have a year-end dividend of $5 per share (D1 = $5), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 10% (assume the market is in ..
Firm A just paid a dividend of $2.50 per share. This dividend is expected to grow at a rate of 18% over the next three years and then grow at a rate of 3% after that into the foreseeable future. If Firm A’s cost of equity is 11 percent, estimate the ..
The company has zero debt in its capital structure. Its overall cost of capital is 9%. The firm is considering a new capital structure with 50% debt. The interest rate on the debt would be 4%. Assuming that the corporate tax rate is 34%, what would b..
JC Penney has faced an identity crisis in recent years. Select the optimal generic strategy for JC Penney to pursue so the company achieves sustainable competitive advantage. Support your selection with researched sources. Include the generic strateg..
The Bake Shoppe has net working capital of $6,100, long-term debt of $10,400, total debt of $15,200, and owners' equity of $18,900. What is the value of The Bake Shoppe's net fixed assets?
Which one of these terms applies to a public company offering new shares to the general public? In return for providing funds, venture capitalists generally require:
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