The price of a risk free bond with face value

Assignment Help Financial Management
Reference no: EM13929944

The price of a risk free bond with face value $12 and maturity one year is one dollar higher than the spot price of stock A. Also, a call option on stock A with a strike price $12 and maturity 1 year, has a premium of $0.21. What is the value of a put option with a strike price $12 and maturity 1 year? Show your working

Reference no: EM13929944

Questions Cloud

What is the net first cost of purchasing the new gear hobber : A company owns a 6-year old gear hobber that has a book value of $60,000. The present market value of the hobber is $80,000. A new gear hob- ber can be purchased for $450,000. Using an insider’s point of view, what is the net first cost of purchasing..
Distribution of the ending retirement fund balance : Modify the spread- sheet to include the assumptions that the annual salary increase is triangular with a minimum of 1%, most likely value of 3%, and maximum value of 5%, and that the annual investment return is triangular with minimum of 5%, most lik..
Ishares dividend stock fund : Suppose you invested $60 in the Ishares Dividend Stock Fund (DVY). It paid a dividend of $0.70 today and then you sold it for $65. What was your return on investment? A) 8.25% B) 9.00% C) 9.50% D) 9.75%
How could the gift shop avoid the theft of cash : How could The Gift shop avoid the theft of cash that is concealed by the use of fictitious NSF checks?
The price of a risk free bond with face value : The price of a risk free bond with face value $12 and maturity one year is one dollar higher than the spot price of stock A. Also, a call option on stock A with a strike price $12 and maturity 1 year, has a premium of $0.21. What is the value of a pu..
What will be your rate of return if price of telecom stock : You are bullish on Telecom stock. The current market price is $44 per share, and you have $2,200 of your own to invest. You borrow an additional $2,200 from your broker at an interest rate of 5.5% per year and invest $4,400 in the stock. What will be..
What is the maximum inventory of fertilizer : The Gentry Garden Center sells 90,000 bags of lawn fertilizer annually. The optimal safety stock (which is on hand initially) is 1,000 bags. Each bag costs the firm $1.50, inventory carrying costs are 20%, and the cost of placing an order with its su..
Estimate the present value of tax benefits from depreciation : Your company is considering a new project that will require $855,000 of new equipment at the start of the project. The equipment will have a depreciable life of 9 years and will be depreciated to a book value of $144,000 using straight-line depreciat..
Tax rates in different areas to make their decision : When choosing where to locate a new business, some businesses will look at the tax rates in different areas to make their decision. Why do you think they consider this? What impact do you think the tax rate would have on the company’s profits? What a..

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is the value problem

What is the value today of a 15-year annuity that pays $650 a year? The annuity’s first payment occurs six years from today. The annual interest rate is 11 percent for Years 1 through 5, and 13 percent thereafter.(Do not round intermediate calculatio..

  Monthly payment in advance will be required to pay off

A $613,811 warehouse if being purchased by your company. The deal requires a down payment of 90,147 with the remainder of the purchase price paid over 20 years, payments in advance. The annual interest rate applicable is 5.88. What monthly payment in..

  What income effects would be reported from ownership

Penston Company owns 40 percent (40,000 shares) of Scranton, Inc., which it purchased several years ago for $182,000. Since the date of acquisition, the equity method has been properly applied, what income effects would be reported from its ownership..

  Considering adding robotic paint sprayer to production line

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $840,000, and it would cost another $24,000 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depr..

  The expected rate of return on an average stock

Stock R has a beta of 1.4, Stock S has a beta of 0.75, the expected rate of return on an average stock is 13%, and the risk-free rate is 5%. By how much does the required return on the riskier stock exceed the required return on the riskier stock exc..

  Using the ddm what is estimate of the current stock price

Stock X's expected dividend in one year of $3.00 and the dividend is expected to grow at a constant rate of 6%.   The required return is 10%. Using the DDM what is the estimate of the current stock price?

  Savings bonds and coupon rate

The school you would like to attend costs $100,000. To help finance your education, you need to choose whether or not to sell your 1,000 shares of Apple stock, 1,000 EE Savings Bonds (with $100 denominations and 4.25% coupon rate) that are five years..

  Consider a project that has expected net cash flows

Consider a project that has expected Net Cash Flows of $25,000 in each of the 5 years of the project. The project has a Net Investment of $80,000. Given this, what is the IRR?

  1 buckeye corp is currently an all-equity firm with a

1. buckeye corp. is currently an all-equity firm with a market value of equity of 100 million. the current expected

  What is the current book value of the old machine

A five year old machine cost $15,000 when new and is being depreciated on a a straight line basis to a zero salvage value in 5 more years ( 10 years total life.) the operating expenses for this machine are $2500 as of the end of each year.

  Ability of financial calculators and computer software

This problem is useful for testing the ability of financial calculators and computer software. Consider the above cash flows. The IRRs, from smallest to largest, are____ percent, ___percent, ___percent, and ___percent.

  Company have to wait before expanding its operations

Meadow Brook Manor would like to buy some additional land and build a new assisted living center. The anticipated total cost is $28 million. Management has decided to save $1.4 million a quarter for this purpose. The firm earns 6 percent compounded q..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd