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Consider a 6-month European put on GOOG with a strike price of $650. GOOG spot price is $725 and its volatility is 25%. The stock is not expected to pay any dividend. The risk-free rate is 4%.
(a) Use Black-Scholes-Merton (BSM) model to price this put option.
(b) What is the put delta? If an investor with a short position decides to delta hedge, what would the net cash flow be?
(c) Without using BSM model, what are the 6-month 650-strike straddle price and its delta?
Delmont Transport Company (DTC) is evaluating the merits of leasing versus purchasing a truck with a 4-year life that costs $40,000 and falls into the MACRS 3-year class. What is the net advantage to leasing?
You are considering two bonds. Bond A has a 9% annual coupon while Bond B has a 6% annual coupon. Both bonds have a 7% yield to maturity, and the YTM is expected to remain constant.
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A company currently pays a dividend of $3.75 per share (D0 = $3.75). It is estimated that the company's dividend will grow at a rate of 21% per year for the next 2 years, then at a constant rate of 6% thereafter. The company's stock has a beta of 1.4..
On July 1, 2010, Bill invested P into a fund which accumulates at an interest rate of 7% compounded monthly. On July 1, 2012, Judy invested 100 in a fund with a discount rate of 9% compounded quarterly. On July 1, 2010, the sum of the present value s..
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Apply what you have learned about qualitative and quantitative risk analysis to a scenario of your choosing Some examples would be home improvement project, changing jobs, vacation plans The purpose of this activity is to simplify the subject and as..
Higher inventory turnover suggests that A. the company's inventory is more liquid OR B. the company's inventory is somewhat obsolete OR C. the company has a higher inventory balance OR D. the company's sales are higher.
You have been employed by Telemetry Medical Instruments (TMI) for seven years and participate in their 401 (k) plan by having 5% of your paycheck invested in the plan. What does prudent investment management suggest that you do about risk?
Calculate selected ratios and obtain industry averages for comparison and select a company and copy/paste its financial statements
A loan with monthly compounding has an APR of 6%. What is the periodic interest rate? What is the APR of a 30-year, $300,000 mortgage with monthly payments of $2000? What is the effective annual rate of a savings account that pays an APR of 5% and co..
What simple interest rate would a bank have to offer a client to compete with another bank that offers 25% return compounded daily?
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