Discuss the put-call parity relationship

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1. What impact does the plowback ratio have on the P/E ratio?

2. Define each of the following terms and give examples for each:

Call Option

Put Option

In the money

3. What is the Black-Scholes formula? Provide a definition for each element of the formula.

4. In what circumstances would you choose to use a dividend discount model rather than a free cash flow model to value a firm?

5. Why do you think the most actively traded options tend to be the ones that are near the money?

6. Discuss the put-call parity relationship.

Reference no: EM131412583

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