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A financial institution has the following trading strategy using options:
Type Position Strike price Option premium
Put 1 $55 $3Put 2 $60 $5Put 1 $65 $8
a. Construct a table showing the payoff and profit from the strategy.
b. For what range of stock prices would the strategy lead to a loss?
Calculate the weighted average cost of capital (WACC) for the project.
Photosynthesis, Inc. is considering a project that will result in initial after-tax cash savings of $2 million at the end of the first year, and these savings will grow at a rate of 6% per year indefinitely.
Examine the key reasons why a business may not want to hold too much or too little working capital. Provide two examples that illustrate the consequences of either situation.
Dudley Industries developed the following standard costs for direct materials and direct labor for gadgets:
b. Explain why the fund manager might want the notional principal on this swap to vary over time and what the most logical pattern for this variation would be
Calculate the price per share in the "good" state of the world, the price per share in the "bad" state of the world, and, hence, the expected price per share.
The dividend should grow rapidly-at a rate of 50 percent per year-during Years 4 and 5. After Year 5, the company should grow at a constant rate of 8 percent per year. If the required return on the stock is 15 percent, what is the value of the stock ..
What is the price of a 0.75-year floating rate bond that pays a semiannual coupon equal to floating rate plus 2% spread? We know the following: a. There is a zero coupon bond Pz(0, 0.25) = 99.70 b. There is a zero coupon bond Pz(0, 0.50) = 99.20.
what is the decision to be made to generate profit. calculate the variation of profit associated with the two expansion alternatives. Which decision is preferred for the objective of minimizing the risk or uncertainty?
Both alternatives have a useful life of 20 years and no market value at that time. The MARR is 20 % per year. Determine the annual worth (AW) of the most profitable course of action. (Enter your answer as a number without the dollar sign.)
A surgical equipment manufacturer
Assume that for a period of time, long-term corporate bonds had an average return of 8.0 percent with a standard deviation of 12.0 percent. What is the 95 percent probability range of returns?
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