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Consider an option on a non-dividend-paying stock when the stock price is $48, the strike price is $45, the risk-free interest rate is 6% per annum, the volatility is 20% per annum, and the time to maturity is five months. It can be shown that d1 = .7576 and d2 = .6285.
Create a delta neutral portfolio of call options and stock. Short 10,000 call options (100 contracts). How many shares would you buy or sell?
Make sure that you show or explain all calculations. Make sure that you state the number of shares. Make sure that you state whether you would buy or sell the shares
Honda Motor Co. prices its whole line (from the $15,000 Honda Fit economy sedan to the $40,000 Pilot SUV) so that it offers high quality at reasonable prices. What pricing policy is Honda using?
Which of the following statements is correct regarding the law of large numbers?
Universal Exports has 11 percent coupon bonds making annual payments with an YTM of 8 percent. The current yield on these bonds is 10 percent. How many years do these bonds have until they mature?
We have the Washington firm on which we have the following information. Its bheta unlevered is 3, its D/E is 4/1, and its tax rate is .3. Additionally we know that the default free rate is 5% and the stock market has returned 11 % over a long period ..
Your firm is contemplating the purchase of a new $630,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $70,000 at the end of that time. You will save $260,000 before..
You own a portfolio that has $2,100 invested in Stock A and $3,350 invested in Stock B. If the expected returns on these stocks are 11 percent and 17 percent, respectively, what is the expected return on the portfolio?
(Bull Spread) An investor who is bullish about a stock (beleiving that it will rise) may wish to construct a bull spread for that stock. One way to construct such a spread is to buy a call with strike price K1 and sell a call with same expiration dat..
Finding operating and free cash flows Consider the following balance sheets and selected data from the income statement of Keith Corporation. Calculate the firm’s operating cash flow (OCF) for the year ended December 31, 2015, using Equation 4.3. Cal..
within the discussion board area write 400ndash600 words that respond to the following questions with your thoughts
carlson machine shop is considering a four-year project to improve its production efficiency by purchasing a new
Kasugai Corporation bought 350 shares of AIG stock at $49.30 per share. At the same time, it sold call options on 200 shares with exercise price $50.00, expiring after 72 days, at $3.50 per share. Kasugai also sold calls on 100 shares, with exercise ..
Suppose the returns on large-company stocks are normally distributed. Also suppose large-company stocks had an average return of 11.8% and a standard deviation of 20.3%. Determine the probability that in any given year you will lose money by investin..
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