Price of put option necessary to guarantee your sales price

Assignment Help Financial Management
Reference no: EM131524290

You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1, 270,000. Over the past five years, the price of land in the area has increased 7 percent per year, with an annual standard deviation of 33 percent. You have approached a buyer and would like the option to sell the land in 12 months for $1, 420,000. The risk-free rate of interest is 5 percent per year, compounded continuously.

What is the price of the put option necessary to guarantee your sales price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Reference no: EM131524290

Questions Cloud

Firm can pay for the project and still earn required return : What is the most the firm can pay for the project and still earn its required return?
Create a layout report of your selected company : Create a layout report of your selected company that fulfills the critical elements below. Justify your reasoning for the important points mentioned
Fundamental advantages and disadvantages of using software : Discuss the fundamental advantages and disadvantages of using software as a service (SaaS) within organizations.
Explain unauthorized disclosure of data or information : Explain Unauthorized disclosure of data or information. Summarize your findings in at least 300 words. Be sure to provide a link to the article.
Price of put option necessary to guarantee your sales price : What is the price of the put option necessary to guarantee your sales price?
Evaluate and describe any cultural considerations : Examine the major theoretical approaches studied in the class so far (psychodynamic, behavioral, learning, trait and type, and humanistic).
Basic structure of this database : Describe the basic structure of this database (i.e. is there more than one entity/table?, how many fields are there?, what are examples of these fields? etc.).
Draw a decision tree and solve the manager problem : A factory manager must decide whether to stock a particular spare part. The part is absolutely essential to the operation of certain machines in the plant.
Briefly describe trends in the market environment : Identify and briefly describe four trends in the macro-market environment that will have or recently had an influence on the selected industry.

Reviews

Write a Review

 

Financial Management Questions & Answers

  Net cost of the machine for capital budgeting purposes

The Campbell Company is evaluating the proposed acquisition of a new milling machine. The machine's base price is $95,000, and it would cost another $91,000 to modify it for special use. What is the net cost of the machine for capital budgeting purpo..

  What is the internal rate of return of the project

What is the internal rate of return of the following project if the required rate of return is 15%? The initial investment is $175,000. Note: Can you please show me how to do this? I am having trouble following along with the instructions.

  What was his annual rate of return on this sculpture

Although appealing to more refined tastes, art as a collectible has not always performed so profitably. What was his annual rate of return on this sculpture?

  Calculate the new bond price

Consider a 8 percent coupon bond with nine years to maturity and a current price of $1,036.80. Suppose the yield on the bond suddenly increases by 2 percent. Use duration to estimate the new price of the bond. Calculate the new bond price.

  Agree on the number of lessons or the dollar amount

Jack and Scotty begin negotiations where Scotty will give Jack hockey lessons for a certain amount of money per week. While they are still negotiating the dollar amount and the number of lessons, they begin to meet weekly to have lessons. After ten l..

  What is the yield to maturity

Circle K Stores has a bond issue with 10 years to maturity, $1,000 face value, 8% coupon interest compounded semiannually, that are callable in 5 years at $1050. The bonds currently sell in the market for $1,100. What is the yield to maturity?

  Management has already signed the contract and committed to

management has already signed the contract and committed to a project whichhas a large negative net present value. this

  What is maximum annual lease Wolfson would be willing to pay

Wolfson Corporation has decided to purchase a new machine that costs $4.5 million. The machine will be depreciated on a straight-line basis and will be worthless after four years. The corporate tax rate is 30 percent. What is the NAL of leasing for W..

  What is the current market value-required rate of return

Apple Sink Inc. (ASI) just paid a dividend of $2.50 per share. Its dividends are expected to grow at 26% a year for the next two years, 24% a year for the years 3 and 4, 16% for year 5, and at a constant rate of 6% per year thereafter. What is the cu..

  Depreciation of property under MACRS

Which the following statement with respect to the depreciation of property under MACRS is incorrect? Under the half-year convention, one-half year of depreciation is allowed in the year the property is placed in service. The cost of property to which..

  Accounting professionals are skilled in financial analysis

Many accounting and accounting-related professionals are skilled in financial analysis, but most are not skilled in manufacturing. This is especially the case for process manufacturing environments (for example, a bottling plant or chemical factory)...

  Your mortgage next month

How much interest would you owe on your mortgage next month?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd