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A bank has written a call option on one stock and a put option on another stock. For the first option the stock price is 50, the strike price is 51, the volatility is 28% per annum, and the time to maturity is 9 months. For the second option the stock price is 20, the strike price is 19, the volatility is 25% per annum, and the time to maturity is 1 year. Neither stock pays a dividend, the risk-free rate is 6% per annum, and the correlation between stock price returns is 0.4. Calculate a 10-day 99% VaR:
a) Using only deltas
(b) Using the partial simulation approach
(c) Using the full simulation approach.
Discuss the role of Special Purpose Entities (SPEs) in the fall of Enron
If the cost of common equityfor the firm is 17.1%, the cost of prefered stock is 9.3%, the before tax cost of debt is 7.7% and the firms tax rate is 35%, what is QM's weighted average cost of capital
Suppose that there is a 1% probability that operational risk losses of a certain type exceed $10 million. Use the power law to estimate the 99.97% worst-case operational risk loss when the parameter
ACST201 Financial Modelling. Next, develop an e?ective interest rate calculator. The calculator you develop should satisfy the following speci?cations.In the top cell the user enters the percentage nominal rate (like 7%)
What's the future value of a 3%, 5-year ordinary annuity that pays $400 each year. If this was an annuity due, what would its future value be.
Which of the following can lead to a reversal of the country's trade pattern? - Growth in the country's total supply (endowment) of the factor that is initially scarce in the country.
Galveston shipyards is considering the replacement of an eight year old riveting machine with a new one that will increase earnings before depreciation and taxes from $27,000 to $54,000 per year.
MS Energy has a target capital structure of 30% debt, 10% preferred stock, and 60% common equity. The company's after-tax cost of debt is 5%, its cost of preferred stock is 8%, and its cost of retained earnings is 12%.
You also know that the total return on the stock is evenly divided between a capital gains yield and diviend yield. If the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share
Suppose a risk averse investor can choose a portfolio consisting of 2 assets with independently distributed returns, both of which have identical means (r1=r2) and identical variances.
The issue will pay a $19 annual dividend in perpetuity, beginning 11 years from now. If the market requires a 12 percent return on this investment, how much does a share of preferred stock cost today
Company X is considering changing its capital structure in light of the tough business environment. Currently, Company X's total capital consists of: $950 million in debt
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