Suppose the following data are given. The current price of XYZ stock is $38/share. XYZ does not pay a dividend. The (annualized) six-month interest rate is 4%. There are six-month call and put options on XYZ stock. The price of a call option with a strike of $42 is $0.54. The price of a put option with a strike of $35 is $1.11. Suppose you believe that the implied volatility of both options will be .20 tomorrow. How do you trade to take advantage of the change in skew?

Owner of a call that expires in the money : Owner of a call that expires in the money |

Amortize the rest with equal monthly payments : A sailboat costs $24,278.00 you pay 15% down and amortize the rest with equal monthly payments over a 9-year period. If you must pay 8.4% compounded monthly, what is your monthly payment? (Do not round until the final answer. Then, round to the neare.. |

Manufacturer produces two models of microwave ovens : An appliance manufacturer produces two models of microwave ovens: H and W. Both models require fabrication and assembly work; each H uses four hours of fabrication and two hours of assembly, and each W uses two hours of fabrication and six hours of a.. |

What is the dispersion trade : Suppose that the AB2 is an equally-weighted stock index of two stocks; it is designed as simply the sum of the two stocks’ prices. Stock A has a volatility of .2, stock B has a volatility of .4, and the current correlation between the two stocks is ... |

How do you trade to take advantage of the change in skew : Suppose the following data are given. The current price of XYZ stock is $38/share. XYZ does not pay a dividend. The (annualized) six-month interest rate is 4%. There are six-month call and put options on XYZ stock. |

Which instrument do you want to be short and long : Suppose the current one-month futures price for a 2-year U.S. Treasury note is 99.77 (percent of par) with a yield of about 1% and the current one-month futures price for a 10-year U.S. Treasury note is 95.17 with a yield of about 3.7%. The 2-year no.. |

Cost of carrying silver includes storage costs : Assume that the cost of carrying silver includes storage costs. On March 17, 2015 the May 2015 futures contract settled at $ 15.578 per ounce (assume it is a 2-month contract), spot traded at $ 15.562 per ounce. Storage costs per ounce are about 0.2%.. |

Utilized special purpose entities : Enron utilized Special Purpose Entities (SPE) in the Cayman Islands to significantly improve its sales and income. AIG and others have used offshore insurance contracts to “smooth out” their earnings. Is it unethical if these corporations enter into .. |

Marginal tax rate will remain : ECB borrows $2 billion dollars by issuing 10 year bonds. ECB cost of debt is 6% so it will need to pay $120M in interest each year for 10 years, and the, and repay the principal $2B in year 10. ECB's marginal tax rate will remain 35% throughout this .. |

## What is the value of mildreds tavern corps stockMildred's Tavern Corp pays an annual dividend rate of 11.80% on its preferred stock that currently returns 15.81% and has a par value of $100.00. What is the value of Mildred's Tavern Corp's stock? |

## Loan outstanding problemYou currently have a one-year-old loan outstanding on your car. You make monthly payments of $350. You have just made a payment. The loan has four years to go (i.e., it had an original term of five years.) Show the timeline from your perspective. How.. |

## Two popular approaches used by automobile dealersThe following are two popular approaches used by automobile dealers: (a) Cash Rebate Versus Low Rate Dealer Financing You are given two mutually exclusive options from the dealer on a $20,000 car: (i) $1,500 cash rebate or (ii) 36-month low rate loan.. |

## Dividends are anticipated to maintain a growth rateThe next dividend payment by Wyatt, Inc., will be $2.90 per share. The dividends are anticipated to maintain a growth rate of 4.75 percent, forever. If the stock currently sells for $49.40 per share, what is the required return? |

## Hsieh-hseih inc must choose between two copiers the zz201. hsieh-hseih inc. must choose between two copiers the zz20 or the gg50.the zz20 costs 300 and will last for three |

## Equity markets are efficientBased on what you have learned so far this semester (Investments-Bodie, Kane, Marcus), do you believe that U.S. equity markets are efficient? Explain. |

## The effective annual yield on a one-year zero coupon bondThe effective annual yield on a one-year zero coupon bond is 7% and the effective annual interest rate on a two-year zero coupon bond is 8%. You are able to arrange a one-year forward investment at rate i for a one-year period. |

## What is the effect of stock not cash dividends and stockWhat is the effect of stock (not cash) dividends and stock splits on the market price of common stock? Why do corporations declare stock splits and stock dividends? |

## What is richmond corporations total net cash flowRichmond Corporation was founded 20 years ago by its president, Daniel Richmond. The company originally began as a mail-order company but has grown rapidly in recent years, in large part due to its Web site. Because of the wide geographical dispersio.. |

## What is the interest rate that the bank can lock inOn January 8, 2016, a bank wants to lock in the 3-month interest rate starting on June 20, 2017. Currently, 6/2017 Eurodollar futures price is 94.93 and 9/2017 Eudollar futures price is 97.55. What is the interest rate that the bank can lock in? (Mar.. |

## How should the acquisition of midland freight be financedHas anybody worked on the "Continental Carriers, Inc." case study? If so, what's the best response to the following question? How should the acquisition of Midland Freight be financed, taking into account to cost of comparisons and other appropriate .. |

## What is the firms weighted average cost of capitalR.S. Green has 250,000 shares of common stock outstanding at a market price of $28 a share. Next year's annual dividend is expected to be $1.55 a share. The dividend growth rate is 2 percent. The firm also has 7,500 bonds outstanding with a face valu.. |

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