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Use the binomial option pricing model to find the value of a call option on £10,000 with a strike price of €15,000. The current exchange rate is €1.50/£1.00 and in the next period the exchange rate can increase to €2.40/£ or decrease to €0.9375/£. The current interest rates are i€ = 3% and are i£ = 4%.
Your client is a biochemist who has discovered a technique to create a new biofuel. He estimates it will take him 2 years to make it economically feasible at a cost of $2,000,000. Assume that loan is set up as interest-only (meaning any accrued inter..
Suppose the call money rate is 6.8 percent, and you pay a spread of 1.9 percent over that. You buy 1,000 shares at $91 per share with an initial margin of 40 percent. One year later, the stock is selling for $99 per share, and you close out your posi..
The preferred stock of Gator Industries sells for $34.63 and pays $2.77 per year in dividends. What is the cost of preferred stock financing? What are the floatation costs for issuing the preferred share and how should this cost be incorporated into..
New Business is just being formed by 10 investors, each of whom will own 10% of the business. The firm is expected to earn $1,000,000 before taxes each year. The corporate tax rate is 34% and the personal tax rate for the firm's investors is 35%.
When looking at these types of projects, one must consider any cash flows that arise from surrendering old equipment before the end of its useful life.
A firm is expected to pay $2 dividend per share in year 1 (D1=$2) and the dividend is expected to grow at a constant rate of 5%. If the firm's stock price is $28.64 based on the constant growth model, what is the required rate of return on the stock?
An analyst for Credit Suisse in Zurich (Switzerland) receives the following quotes for Swiss franc and Thai baht (both against the dollar), for spot and six-month forward. Spot exchange rate: What is the baht to franc spot exchange rate ?
Assume that the average firm in your company's industry is expected to grow at a constant rate of 6% and that its dividend yield is 7%. After Year 2, divdend growth will be constant at 6%. What is the required rate of return on your company's stock? ..
What is the difference between liabilities and equity? What makes a liability a current liability? Give some examples of current liabilities.
For each of the following, compute the present value (Do not include the dollar signs ($). Enter rounded answers as directed, but do not use the rounded numbers in intermediate calculations
Options on GBP are traded on the Philadelphia Stock Exchange. A call expiring in three months with a strike price of USD 1.60 is trading at a price of USD 0.04. Consider an investor who buys three contracts and holds the options to maturity. At matur..
The master budget includes all of the following except. A formal written statement of management’s plans for a specified future time period, expressed in financial terms is a(n). All of the following are financial budgets except the. The master budge..
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