### What is the risk-neutral probability

Assignment Help Finance Basics
##### Reference no: EM132184129

Question - We can calculate the relative changes u , d in the binomial tree if we know the volatility and mean return of the stock. In this formulation, we are assuming the price movement as a logarithm process. To calculate the relative changes, we can use 1+U = eσ √(δt)  and 1+ D = e-σ √(δt). In this process, we can calculate k(0, T) = ln(ST/S0) Price a 5 month call option where the σ = 0.20, S0 = 62, expiration is 5 months, the strike, X, is 60, and the annual rate of interest is 10% compounded monthly.

What is the risk-neutral probability?

Draw the entire tree showing all stock prices and option values at each step.

#### Semi-annual coupon interest payments

A three-year bond has 8.0% coupon rate and face value of \$1000. If the yield to maturity (YTM) on the bond is 10%, calculate the price of the bond assuming that the bond mak

#### Calculate the current beta for mercury

Calculate the current beta for Mercury, Inc. The rate on 30-year U.S. Treasury bonds is currently 8%. The market risk premium is 5%. Mercury returned 18% to its stockholders

#### Compute price of bonds for olsens clothing stores

There are 25 years to maturity. Compute the price of the bonds based on semiannual analysis. With 20 years to maturity, if yield to maturity goes down substantially to 8 per

#### Decision making gone awry

Sometimes social influences and societal pressures can influence decision making for the better and sometimes for the worse. In addition to these pressures, there are risks

#### Variation and statistical thinking strategy

Compare and contrast the fundamental differences between special-cause variation and common-cause variation. Provide one (1) business process example of each variation to su

#### Secondary markets for corporation stock trades

In the secondary markets, there is no additional capital raised, yet can someone describe how the corporation whose securities are being traded.

#### Explain the process for creating an operating budget

Explain the process for creating an operating budget and its importance. Explain how revenues and expenses are grouped for planning and control in the financial statements.

#### Impact of the recapitalization on southern''s cost of equity

Assuming that Southern's debt is currently risk free and that the corporate tax rate is zero (as are all personal income tax rates), determine (a) the impact of the recapitali

### Write a Review 