The continuously compounded risk-free interest rate

Assignment Help Financial Management

Reference no: EM13846759

For Stock S and Stock R, you are given:

i. The current price of Stock S is 50. Stock S pays dividends continuously at a rate proportional to its price. The dividend yield is 2%.

ii. The current price of Stock R is 40. Stock R pays a dividend of $ X in 3 months and another dividend of $ 2X in 6 months.

iii. A European option gives its owner the right to exchange a share of Stock S for two shares of Stock R at the end of 9 months. The value of this option is $35.

iv. A European option gives its owner the right to exchange two shares of Stock R for a share of Stock S at the end of 9 months. The value of this option is $8.96.

v. The continuously compounded risk-free interest rate is 9%.

Calculate X

Reference no: EM13846759

Questions Cloud

Read the case below and develop a draft : Read the case below and develop a draft (1000-1500 words in APA format) of a plan Paul would have done if he had stayed. The plan is a means to identify, on a general level, the options for management to consider and for Paul to pursue further. Ass..

Describes a strategic compensation plan : Write a 1200-1500 word paper in APA format that describes a strategic compensation plan for machine operators at Plastec Company. Refer to the descriptions of this company below. Include at least 3 referenced articles and cite them as appropriate

What is the future value if payments are ordinary annuity : What is the present value of the payments if they are in the form of ordinary annuity? What is the present value if the payments are annuity due? Suppose you plan to invest the payments for five years. What is the future value if the payments are an ..

What would happen to the stocks required rate of return : A stock has a required return of 9%. The risk-free rate is 5% and the market risk premium is 3%. What is the stock's beta? If the market risk premium increased to 4%, what would happen to the stock's required rate of return? VeggieStrips has been gro..

The continuously compounded risk-free interest rate : A European option gives its owner the right to exchange two shares of Stock R for a share of Stock S at the end of 9 months. The value of this option is $8.96. The continuously compounded risk-free interest rate is 9%.

What was the contribution of malcolm x to the civil rights : What was the contribution of Malcolm X to the civil rights cause? What was his connection with the Nation of Islam, and did that organization achieve its goals?

Assessing the impact of an incentive plan : Ladbrecks is a major department store with fifty retail outlets. The company's stores compete with outlets run by companies such as Nordstrom, Macys, Marshall Fields, Bloomingdales and Saks Fifth Avenue. The plan was implemented in stores sequentiall..

Explain how the revolt on the slave ship : Explain how the revolt on the slave ship- AMISTAD- and the court case over the Africans on board this ship had an influence on the Abolitionist movement in America. Be detailed in your answer. Give key facts, people and events to help support your an..

An essay on religion and is exactly : You just submitted me an essay on religion and is exactly what I was looking for. Can you add more to it and include some of these to get to 2000 words???Instructions from the instructor are here: (and I need to have at least three of them in the es..

User Account

All Pages