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A stock is currently selling at $60. Over each of the next two six month periods, the stock may move up to a factor 1.15 or down by a factor of 0.85 each period. A call option with strike price of $59 and a maturity of one year is available. The current risk free rate is 4.6% per year. A. Is the call option in the money, at the money, or out of the money? Explain b. What is the intrinsic value of this call option? May the price of a call option be ever lower than the intrinsic value? Why? c. Find the price of the call option. d. Find the price of a put option with the same strike price and maturity.
A corporate bond has a face value of $1,000 and an annual coupon interest rate of 6%. Interest is paid annually. 12 years of the life of the bond remain. The current market price of the bond is $1,127, and it will mature at $1,000. To the 1/10 percen..
Allied Products, Inc., is considering a new product launch. The firm expects to have annual operating cash flow of $9.2 million for the next 8 years. What is the NPV of the new product? what level of expected cash flows does it make sense to abandon ..
You want to use a building your company owns to develop a new investment opportunity. You have checked with property management in your company, and have consulted a few commercial brokers. What best describes how this should be treated in your prepa..
Two firms merge (companies A & B) and company A is going to assume all the assets and liabilities of the two companies. Current market value of company A is $150 million and current market value of company B is $87 million. The merger is predicted to..
Ezzell Corporation issued perpetual preferred stock with a 10% annual dividend. The stock currently yields 10%, and its par value is $100. What is the stock's value? Suppose interest rates rise and pull the preferred stock's yield up to 15%.
Suppose that the spot rate is $.9843/Euro, the six-month forward rate is $.9687/Euro and the yields on six-month money market instruments are 9% per annum in the US and 11% per annum in Europe. In which direction would the value of the euro move in t..
ABC Company is currently quoted at 53 on NASDAQ. A Rights Offering has been declared with an exercise price of 48, and 4.92 rights are needed to buy a new share. If you own 10 round lots of this company, answer the following: What is the value of a r..
campc is a 5-year old chain of 12 medium-sized supermarkets. the supermarkets are targeting the middle- and top-income
Diamond Eyes, Inc., has sales of $21 million, total assets of $18.3 million, and total debt of $9.5 million. Assume the profit margin is 9 percent. What is net income? (Enter your answer in dollars not in millions, i.e. 1,234,567.) Net income $ What ..
Suppose you know that a company’s stock currently sells for $57 per share and the required return on the stock is 11 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it..
Sales for L.B. Merielle Inc. during the past year announced to 5.05 million. The firm provides parts and supplies for oil field service companies. Gross profits for the year were 3.05 million. Operating expenses totaled 1.12 million. The interest inc..
A firm has an expected perpetual EBIT = $6,000. The unlevered cost of capital = 8% and there are 20,000 shares of stock outstanding. The firm is considering issuing $10,000 in new par bonds to add financial leverage to the firm. The proceeds of the d..
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