1. Underlying trading at $100, and $20 annualized implied volatility. You think IV is too low and decide to buy a 90-110 strangle with 3 months to expiration (DTE=63).

(Hint: a strangle is a combination of OTM PUT and OTM CALL.)

Assume interest rate of zero and normal distribution of prices.

1a. You think $20 annual vol is too low. You believe a fair annual vol should be $40. What is the statistically fair value of the strangle at $40 vol?

1b. You think $20 annual vol is too high. You believe a fair annual vol should be $10. What is the statistically fair value of the strangle at $10 vol?

1c. What is the delta and gamma of your strangle when purchased (priced at $20 annual vol)?

1d. How much do you lose per day for your strangle if underlying did not move?

1e. Underlying moved to 95 immediately after your bought the strangle (DTE remains 30). What is the new delta for your strangle when underlying moved to $95? How should you hedge your delta with underlying?

1f. Underlying moved to 105 immediately after your bought the strangle (DTE remains 30). What is the new delta for your strangle when underlying moved to $105? How should you hedge your delta with underlying?

1g. If underlying closed at 99 one day after your purchase , what is your PnL from delta, gamma, and theta for that day?

1h. If underlying closed at 102 one day after your purchase , what is your PnL from delta, gamma, and theta for that day?

1i. What is the breakeven size of underlying movement, ie at what price of underlying in 1 day that your net PnL is zero?

Cash flows for each year taking into account inflation rate : Determine the current cash flows for each year taking into account the inflation rate (actual dollar cash flows). |

Determine the economic order quantity and total annual cost : Determine the economic order quantity and total annual cost under the assumption that no backorders are permitted. |

What irr would you earn based on five year holding period : What IRR would you earn based on this 5 year holding period? |

Involve real impact on the cash flows of business : How can we apply the knowledge of traditional option pricing techniques in such decisions that involve real impact on the cash flows of a business? |

Assume interest rate of zero-normal distribution of prices : You think $20 annual vol is too low. You believe a fair annual vol should be $40. What is the statistically fair value of the strangle at $40 vol? |

Tax repatriation is hot issue in regards to corporate tax : The issue of tax repatriation is a hot issue in regards to corporate tax policy. Would it be wise to lower the corporate tax rate for all US companies? |

Calculate the price to earnings ratio : Calculate the Earnings Per Share for the company. Calculate the Price to Earnings Ratio. |

What is best estimate of the firms corporate cost of capital : A relatively small medical group practice is trying to estimate its corporate cost of capital. What is best estimate of the firm's corporate cost of capital? |

What is the book value per share based on the information : What is the Book Value Per Share based on the information above? If the market price per share $50 for XYZ Company, what is the total value of XYZ Company? |

## What is the expected change in real interest ratesThe short-term nominal interest rate is 5%, with an expected inflation of 2%. Economists forecast that next year's nominal rate will increase by 100 basis point, but inflation will fall to 1.5%. What is the expected change in real interest rates? |

## Negligible amounts of cash and marketable securitiesChastain Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash conversion cycle. Chastain’s 2016 sales (all on credit) were $121,000; its cost of goods sold is 80% of sales; and it .. |

## What is the yield to maturity of the bond todayA corporate bond has a face value of $1,000 and an annual coupon interest rate of 7%. Interest is paid annually. 10 years of the life of the bond remain. The current market price of the bond is $1232. To the nearest 1/100 0f 1 percent, what is the yi.. |

## Using the net present value when evaluating projectsTall Trees, Inc. is using the net present value (NPV) when evaluating projects. You have to find the NPV for the company’s project, |

## What is the value per share of the companys stockRagan, Inc., was founded nine years ago by brother and sister Carrington and Genevieve Ragan. The company manufactures and installs commercial heating, ventilation, and cooling (HVAC) units. Assuming the company continues its current growth rate, wha.. |

## What if you use the geometric average growth rateSuppose Stark Ltd. just issued a dividend of $2.59 per share on its common stock. The company paid dividends of $2.25, $2.34, $2.41, and $2.52 per share in the last four years. What if you use the geometric average growth rate? If the stock currently.. |

## What is estimated value per share of your firms stockAssume that the average firm in your company’s industry is expected to grow at a constant rate of 6% and that its dividend yield is 7%. Your company is about as risky as the average firm in the industry, what is the estimated value per share of your .. |

## Assume no other income and taxes during retirementAmanda is expected to receive full social security retirement benefit of $1520 when she turns 67.If her life expectancy is 88 years and expected rate of return is 3%, should Amanda take full benefit at 67 or delay benefit till 70? Assume no other inc.. |

## Its working capital policies to improve its cash flow cycleStrickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Strickler's sales last year were $190,000 (all on credit), and it earned a net profit of 6%. Its inventory turnover was 9.5 times during the y.. |

## Stimate the cost of capital for a project same as googleWeb Question: Estimate the cost of capital for a project that has the same risk as the cash flows earned by Google. |

## What is the price of the stock nine years from todayMetallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $14.50 per share 10 years.. |

## Fixed income securitieswhat effect do you expect this will have on fixed income securities and why. |

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