What should be the value of the put

Assignment Help Financial Management
Reference no: EM131072777

A put option on a stock with a current price of $42 has an exercise price of $44. The price of the corresponding call option is $3.60. According to put-call parity, if the effective annual risk-free rate of interest is 6% and there are four months until expiration, what should be the value of the put? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of the put

Reference no: EM131072777

Questions Cloud

Leading innovator in the telecommunications industry : "It seemed like a real ego booster when I got to take over my boss's job during his vacation," thought Dave Peterson. "Now I'm not so sure. Both Seamus and Jeremy really want to be in charge of this new project. I have to decide between them and I..
Comparing two savings accounts : You are comparing two savings accounts. Account A has an APR of 4.65 percent and an EAR of 4.75 percent. Account B has an APR of 4.70 percent and an EAR of 4.70 percent. Given this, you should invest in account:
Define appropriate vectors, and restate the problem : Define an appropriate matrix, and restate the problem using the phrase "columns of A."
What is the effective cost of borrowing in case : Your firm has an average collection period of 24 days. Current practice is to factor all receivables immediately at a discount of 1.4 percent. What is the effective cost of borrowing in this case?
What should be the value of the put : A put option on a stock with a current price of $42 has an exercise price of $44. The price of the corresponding call option is $3.60. According to put-call parity, if the effective annual risk-free rate of interest is 6% and there are four months un..
What is its operating roa : A firm has an ROE of 3%, a debt/equity ratio of 0.7, a tax rate of 30%, and pays an interest rate of 9% on its debt. What is its operating ROA?
Personal creativity inventory to introduction : This inventory provides you the opportunity to assess, reflect on, and reduce possible personal barriers to creativity. For each of the statements in the inventory, use the following scale to express which number best corresponds to your agreement..
Assess the profitability of capital budgeting projects : Northwest Utility Company faces increasing needs for capital. Fortunately, it has an Aa3 credit rating. The corporate tax rate is 40 percent. Northwest’s treasurer is trying to determine the corporation’s current weighted average cost of capital in o..
Increase firm financial leverage : Which of the following would increase a firm's financial leverage? According to the MM model of capital structure, the present value of the tax shield is offset by potential ____, resulting in an optimal capital structure. The presence of a large amo..

Reviews

Write a Review

 

Financial Management Questions & Answers

  New job you estimate that your average salary

At your new job you estimate that your average salary over your working years will be $95,000 per year. How many more years would you have to work to receive as much benefit from a flat benefit of $3,000 times years of service as you would receive fr..

  You recently graduated from college and your job search led

you recently graduated from college and your job search led you to east coast yachts. since you felt the companys

  When might a company call their callable bonds

When might a company call their callable bonds?

  What was the companys depreciation and amortization expense

The company has $6,600 interest expense, and the corporate tax rate is 35 percent. What was the company's depreciation and amortization expense?

  The current yield on these bonds

Backwater Corp. has 6 percent coupon bonds making annual payments with a YTM of 5.2 percent. The current yield on these bonds is 5.55 percent. How many years do these bonds have left until they mature?

  Capital structure change

JanAm generates $30 million in perpetual operating income (i.e., no change in investment policy). The company has a market capitalization of $100,000,000, and its share is currently selling at $100 per share. How can investors undo the effect of JanA..

  Flexible budget cost formula for indirect materials

Muntjac Corporation's flexible budget cost formula for indirect materials, a variable cost, is $0.75 per unit of output. Assume that actual units produced equals standard units produced. If the company's performance report for last month shows a $250..

  What is the beta for the food division

As a result of stockholder pressure, RJR Nabisco is considering spinning off its food division. You have been asked to estimate the beta for the division. You decide to so by obtaining the beta of comparable publicly traded firms (often called pure p..

  Comparing two possible capital structures for firm

You are comparing two possible capital structures for a firm. The first option is an all-equity firm. The second option involves the use of $3.8 million of debt. The break-even point between these two financing options occurs when the earnings before..

  What coupon rate should the company set on its new bonds

BDJ Co. wants to issue new 25-year bonds for some much-needed expansion projects. The company currently has 7.8 percent coupon bonds on the market that sell for $1,125, make semiannual payments, and mature in 25 years. What coupon rate should the com..

  What is the equivalent annual annuity for reach plane

Shao Airlines is considering the purchase of two alternative planes. Plane A has an expected life of 5 years, will cost $100 million and will produce net cash flows of $30 million per year. Plane B has a life of 10 years, will cost $132 million and w..

  Worth immediately after your shares are purchased

You are investing $8,000 in a mutual fund that charges a 4.50 percent front-end load. The offering price is $24.70 a share. What will your investment be worth immediately after your shares are purchased?

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