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1- A stock sells for $52 per share, and the 6-month European call on the stock with a strike price of $50 sells for $2.50. The stock is not expected to pay any dividends in next six months. The risk free interest rate is 4% per annum, continuously compounded. How can you get a free lunch from the market? Describe your transactions clearly. 2- An at-the-money three-month European call option on a non-dividend-paying stock has a market price of $1.27. The stock price is $20 and the risk-free interest rate is 8% per annum, with continuous compounding. Verify that the implied volatility is about 27%.
What is the expected rate of return on Botolph's equity, after they have issued the new debt? (Hint: Do not make any assumptions about the market risk premium. Do not try to use the CAPM. Use your answer in part C)
a bond matures in 2020 and has an annual coupon of 3.65 percent payable on january 1 and july 1. the current price of
Bond J is a 4 percent coupon bond. Bond K is a 10 percent coupon bond. Both bonds have 12 years to maturity, make semiannual payments, and have a YTM of 7 percent.
A cash dividend is declared and paid. Merchandise is sold at a profit, but the sale is on credit. Long-term bonds are retired with the proceeds of a preferred stock issue. Missing inventory is written off against retained earnings.
list and describe each of the three methods used to calculate the cost of common
The arrangement also requires a compensating balance equal to 6% of the amount borrowed which must be placed in a non-interest-bearing account. The bank uses compound interest on its LOC loans.
Calculate the after-tax cost of the Sony bond given David's tax bracket.
annual risk-free rate is 2 and the annual dividend yield on the sampp500 is 3. if the price of a 1-year futures
Determine the fair market value of Apple corporation (AAPL) stock values using RIM model and Price Ratio Analysis, given that Apple does not pay dividends?
What are the one-time cash flows associated with ending the project (i.e. terminal Cash flows)? Note, we only want terminal cash flows, not operating cash flows in the last year.
Your estimate of the market risk premium is 7%. The risk-free rate of return is 3.0% and General Motors has a beta of 1.3. According to the Capital Asset Pricing Model (CAPM), what is General Motor's expected return?
What are two critical operating assumptions (identify one for profits, and one for capital) embedded in this forecast method?
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