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Determine the value of a call option on the JPY that has the following characteristics: (a) it is of type European (b) it matures in 9 months (c) the strike price is USD 0.010. In the spot market the JPY is trading at USD 0.008. The US and Japanese interest rates are 4% and 1% respectively. The JPY has an annual standard deviation of 15%.
Given the information in the above question, what is the value of a put option with similar parameters?
Fama’s Llamas has a weighted average cost of capital of 11 percent. The company’s cost of equity is 13 percent, and its pretax cost of debt is 9 percent. The tax rate is 40 percent. What is the company’s target debt−equity ratio?
In 2008 Ann and George established a living trust. Ann and George have 2 children Eva and Greg (ages 19 and 21) from the current marriage and Ann has a child Maria (age 33) from a prior marriage. What is the value of Ann’s estate? Is there any estate..
Your firm is planning to invest in an automated packaging plant. Harburtin Industries is an all-equity firm that specializes in this business. Suppose the tax rate is 40%, Harburtin’s equity beta is 0.95, the risk-free rate is 3%, and the market risk..
Suppose a European put has an exercise price of $110 on February 5. The put expires in 145 days. Suppose the appropriate discount rate on Treasury bills maturing in 44 days is 7.615. What is the max value of the European put? If the put were instead ..
Constant growth valuation Harrison Clothiers' stock currently sells for $31 a share. It just paid a dividend of $2.5 a share (that is, D0 = 2.5). The dividend is expected to grow at a constant rate of 5% a year. What stock price is expected 1 year fr..
The next dividend payment by Halestorm, Inc., will be $4.77 per share. The dividends are anticipated to maintain a growth rate of 2 percent forever. If the stock currently sells for $4.3 per share, what is the expected capital gains yield?
In the 1960s energy consumption increased by 10% each year, but by the year 2000 the growth rate was at 1% per year. Give two reasons for the decline in the US energy consumption growth rate.
You purchased 4,200 shares in the New Pacific Growth Fund on January 2, 2010, at an offering price of $63.50 per share. The front-end load for this fund is 5 percent, and the back-end load for redemptions within one year is 1 percent. what is your to..
Gonzales Corporation generated free cash flow of $81million this year. For the next two years, the company's free cash flow is expected to grow at a rate of 9%. After that time, the company's free cash flow is expected to level off to the industry lo..
Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with a retirement income of $32,000 per month for 20 years, with the first payment received 30 years and 1 month from now. Second,..
If the spot rate for Euro is .81 Euro is equal to 1 US $, and the annual interest rate on fixed rate one-year deposits of Euro is 2.5% and for US$ is 1.5%, what is the nine-month forward rate for one Euro in terms of dollars? Assuming the same intere..
Suppose the 3 month U.S. interest rate is 3% ((0.03), the 3 month UK interest rate is 2% (0.02), the current spot rate is $2 = £1, and the 3 month forward rate is $2.04 = £1. Would an investor in USA choose to invest in the US or the UK?
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