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A stock price is currently $ 30. It is known that at the end of one month it will be either $ 32 or $ 28. The risk-free interest rate is 8%. You write a one-month call option with a strike price of 29$.
a) In a risk-neutral world what is the probability of a price moving up? down?
b) What is the value of a one-month European call option with a strike price of $ 29?
Nicole's Neon Signs, Inc. reported a debt to equity ratio of 1.9 times at the end of 2013. If the firm's total assets at year-end are $100 million, how much of their assets is financed with equity?
Summerdahl Resorts' common stock is currently trading at $31.00 per share. The stock is expected to pay a dividend of $1.75 a share at the end of the year (D1 = $1.75), and the dividend is expected to grow at a constant rate of 7% a year. What is the..
If the bank states an effective interest rate of 12% per annum, and there are 52.15 weeks, how much interest do you earn on a deposit of $100,000 over 1 week?
On January 1, 2015, Charlie Corporation acquires all of the net assets of Rocky Corporation for $2,000,000. The following intangible assets are included in the purchase agreement: Assets Acquisition Cost Goodwill and going concern value $105,000 Lice..
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What is its YTM? - If the yield curve is a flat 3%, what is its Macaulay duration?- If the yield curve is a flat 10%, what is its Macaulay duration?
When are each obtained? What is the risk profile of each? What types of lenders participate in each? Why and how do construction and permanent lenders cooperate?
Marko, Inc. is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $6,100, $11,100, and $17,300 over the next three years, respectively. After that time, they feel the business will be worthless. Marko has deter..
Quantitative Analysis for Management (Twelfth Edition Pearson) Barry Render, Ralph Stair, Michael Hanna and Trevor Hale. Which one will you choose - a simple model with reasonable accuracy or a complex model with a marginally better accuracy than the..
Consider a C corporation. The corporation earns $5 per share before taxes. After the corporation has paid its corresponding taxes, it will distribute 0% of its earnings to its shareholders as a dividend. What are the shareholder's earnings from the c..
Dunlop Corporation has just issued a callable (at par) three-year 6% coupon bond with semi-annual coupon payments. The bond can be called at par in two years or anytime thereafter on a coupon payment date It has a price of $96. What is the bond's yie..
Employ an arbitrage argument to explain why an American option is always worth at least as much as: (a) a European option on the same asset with the same strike price and exercise date, and (b) its intrinsic value. For both parts (a) and (b) clearly ..
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