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The spot term structure for T-Bills (proxy for the risk free rate) is as follows 30-Day T-Bill=7% per annum, 60-Day T-Bill=7.25% per annum, 90-Day T-Bill=7.5% per annum, 180-Day T-Bill=7.65% per annum and the 270-Day T-Bill=7.85% per annum all with continuous compounding. A stock pays $0.5 per quarter as dividends, the first dividend has just been paid and the current stock price is $50. What is the price of a 6-month At-the-Money European Put option on this stock if the volatility is 35%? Assume the year has 360 days. (if you can include the math, that would be great)
3 Stern Associates is considering a project that has the following cash flow data. What is the project's payback? Year 0 1 2 3 4 5 Cash flows -$750 $300 $310 $320 $330 $340 (Points : 0.42) 2.17 years 2.49 years 2.63 years 2.44 years 2.24 years
You short sold 800 shares of stock at a price of $45 and an initial margin of 55 percent. If the maintenance margin is 30 percent, at what share price will you receive a margin call? What is your account equity at this stock price?
An investor bought 400 shares of stock when its price was $40/share. The price of the stock is now up to $75/share and the investor decides to hedge his position by purchasing 4 puts (premium = $7.50, exercise price of 75). What is the value of a put..
Barra Moore’s credit card company requires a minimum monthly payment of $19.99. The credit card company charges 21% annual interest. Barra owes $1,000 on this card. How much will Barra end up paying the credit card company when the card is paid off?
Richard doesn't always make the smartest decisions when it comes to money. He has more taxes withheld from his paycheck so he will get a large check in April from the IRS. Well, this check came in the mail yesterday. $1200.00 and he deposited it into..
What is the duration of a bond with a par value of $ 10,000 that has a coupon rate of 3.5 percent annually and a final maturity of two years? Assume that the required rate of return is 4 percent compounded semiannually. What is the duration of a two-..
On January 2013, Professor Lee buys a house. Here is the information. What is the effective interest rate? If from January 2013, Professor Lee plans to sell his house after 15 years. What is the effective interest rate for Professor Lee in Jan 2013?
Swenson’s is considering two mutually exclusive projects, Projects A and B, and has determined that the crossover rate for these projects is 11.7 percent.
You invest $10,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 15% and a standard deviation of 21% and a treasury bill with a rate of return of 5%. How much money should be invested ..
Assume a stock selling for $44.89 has a dividend yield of 3.1 percent and a PE ratio of 20.1. What are the earnings per share (EPS) for the company?
Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $14 million, of which 80% has been depreciated. The used equipment can be sold today for $3.5 million, and its tax rate is 30%. What is the equipment'..
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,084,000 and will last for six years. Variable costs are 40 percent of sales, and fixed costs are $225,000 per year. Both machines will be..
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