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3. Assuming that a one year call option with an exercise price of $38 is available for the stock of the DEW corp., consider the following price tree for DEW stock over the next year: a. If the sequence of stock prices that DEW stock follows over the year is $40.00, $42.00, $40.32, and $38.71, describe the composition of the initial riskless portfolio of stock and options you would form and all the subsequent adjustment you would have to make to keep this portfolio riskless. Assume the one year risk free rate is 6%. b. Given the initial DEW price of $40, what are the probabilities of observing each of the four terminal stock prices in one year? (Hint: In arriving at your answer, it will be useful to consider (1) the number of different ways that a particular terminal price could be achieved and (2) the probability of an up or down movement.) c. Use the binomial option model to calculate the present value of this call option. d. Calculate the value of a one-year put option on DEW stock having an exercise price of $38; be sure your answer is consistent with the correct response to part c.
miyagi data inc. sells earnings forecasts for japanese securities. its credit terms are 110 net 30. based on
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How many rights could Todd buy with his $4,800? Alternatively, how many shares of stock could he buy with the same $4,800 at $66 per share?
Allocate the joint costs using relative weight. With these costs, what is the profit or loss associated with Cooper?
A 1949 Vincent Black Shadow Series V motorcycle sold for about $45,000 in 1996. If you were fortunate enough to have bought one new for $630 in 1949,
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a treasury bond that matures in 10 years has a yield of 6. a 10-year corporate bond has a yield of 7. assume that the
Assuming Blades enters into the agreement with Jogs, Ltd., how will its overall transaction exposure be affected?
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