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Use the following data from January 31 of a particular year for a group of March 480 options on futures contracts to answer parts a through g.
Futures price: 483.10Expiration: March 18Risk-free rate 0.0284 percent(simple)Call price: 6.95Put price: 5.25
a. Determine the intrinsic value of the call.
b. Determine the time value of the call.
c. Determine the lower bound of the call.
d. Determine the intrinsic value of the put.
e. Determine the time value of the put.
f. Determine the lower bound of the put.
g. Determine whether put-call parity holds.
Explain the difference between a business plan and an acquisition plan. Why is it important to get senior management heavily involved early in the acquisition process?
Summerdahl Resorts' common stock is currently trading at $21.00 per share. The stock is expected to pay a dividend of $1.50 a share at the end of the year (D1 = $1.50), and the dividend is expected to grow at a constant rate of 5% a year. What is the..
First Simple Bank pays 9.3 percent simple interest on its investment accounts. First Complex Bank pays interest on its accounts compounded annually. What rate should the bank set if it wants to match First Simple Bank over an investment horizon of 13..
You have $10,000 and you want to know if Utes,LLC is a good buy. The firm’s total risk is 15%, its systematic risk is 1.4, the t-bill rate is 2.5%, the 30 year treasury rate is 3.5%, and the average market return is 8.9%. According to the CAPM, what ..
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ABC has a proposed project which will generate sales of 179 units at a selling price of $226 each. The fixed costs are $11,145 and the variable costs per unit are $83. The project requires $151,014 of machinery which will be depreciated on a straight..
You are making a $63,500 investment and feel that a 10% rate of return is reasonable given the nature of the risks involved. You feel you will receive $19,500 in the first year, $24,700 in the second year and $43,200 in the third year. What is the ne..
A firm’s bond currently sells for $1,040, has a 7% coupon interest rate and $1,000 par value, pays interest annually, and has 8 years to maturity. The firm’s corporate tax rate is 35%. What is the after-tax cost of the bond?
Oil Company has purchased production facilities for $2 million and has put them into service. Calculate the declining-balance depreciation (200% declining balance) for a five-year depreciation life.
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