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Calculate and compare the risk (betas) of the following investments: (a) a share of Google stock; (b) a one-year call option on Google; (c) a one-year put option; (d) a portfolio consisting of a share of Google stock and a one-year put option; (e) a portfolio consisting of a share of Google stock, a one-year put option, and the sale of a one-year call. In each case assume that the exercise price of the option is $430, which is also the current price of Google stock.
Using a 0.05 level of significance, is there evidence of a significant difference between the two methods in the proportion of fair ratings?
Calculate the expected return on each share. - Calculate the variance and standard deviation for each share.- calculate the amount for the regular installments?
Assume that interest rates for one-year securities are expected to be 2 percent today, 4 percent one year from now and 6 percent two years from now. Using only the pure expectations theory, what are the current interest rates on two-year and three-ye..
Kim Yee is 30 years of age and he visits his financial planner. He tells his financial planner that he would like to have $10,000 per month in his retirement. (He retires at age 60 and is expected to live till 100). When he is 45, he will receive $20..
A newly issued 10-year maturity, 4% coupon bond making annual coupon payments is sold to the public at a price of $890. The bond will not be sold at the end of the year. The bond is treated as an original-issue discount bond. Calculate the constant y..
Elmhurst Inc. bonds bearing a coupon rate of 10%, pay coupons semi-annually, have 9 years remaining to maturity, and are currently priced at $960 per bond. The bonds have a face value of $1,000. What is the yield to maturity on these bonds?
The Lo Sun Corporation offers a 6.1 percent bond with a current market price of $781.50. The yield to maturity is 8.43 percent. The face value is $1,000. Interest is paid semiannually. How many years is it until this bond matures?
McKenna Sports Authority is getting ready to produce a new line of gold clubs by investing $1.85 million. The investment will result in additional cash flows of $525,000, $817,500, and $1,200,000 over the next three years. What is the payback period ..
The stock of Big Joe's has a beta of 1.14 and an expected return of 11.2 percent. The risk-free rate of return is 3 percent. What is the expected return on the market? 11.89 percent 8.90 percent 8.20 percent 8.57 percent 10.19 percent
Six-month T-bills have a nominal rate of 5%, while default-free Japanese bonds that mature in 6 months have a nominal rate of 3%. In the spot exchange market, 1 yen equals $0.01. If interest rate parity holds, what is the 6-month forward exchange rat..
Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception. What is the maximum lease payment that you wo..
Ham Co. is thinking to raise $100,000,000 in new equity for a new project. In order to preserve the ownership percentages of current stock holders, the management is thinking to raise the new equity through a right issue. At the moment (that is befor..
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