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Given that exercise price is $75, call option premium is $3.5, put option premium is $1, both options have a time to maturity of 32 days, and the risk-free rate is 5% p.a., please show how you could create a "synthetic stock" that could serve as the underlying asset of the two European options. Determine the price of the synthetic stock.
Calculate the cash flows for each year (years 0 through 5), and the NPV of the project. Yearly revenues grow at 4% per year and yearly expenses grow at 3% per year, working capital is increased from 0 to $1,000 in year 0, working capital is 15% of re..
Counseder a stock worth $30 that can go up or down by 10%. the risk- free rate is 6% the exercise price is $30. find the value of the call option today considering one period binomial? Find the value of the call option today considering a two-period ..
Define and discuss implementation of the following calculations within capital budgeting: IRR, NPV, and Marginal Cost of Capital. When would these be used and what do they tell us?
The default-free yield curve on zero-coupon U.S. Government Treasury securities is given below. Maturity (in years) Rate 1 .01 2 .015 3 .02 4 .025 5 .0275 6 .03 Currently you can buy a corporate bond sold by a company that has some chance of defaulti..
Find the future values of the following ordinary annuities:
here are key financial data for house of herring inc.earnings per share for
A 5-year bond with a 4.45% coupon sells for $107.48. A 7-year bond with a 5.75% coupon sells for 116.564. The conversion factor for the 5-year bond is 0.933891 while the 7-year bond is 0.98588. Assume that the yields for both bonds are 6% and that co..
In 2013 Caterpillar Inc. had about 654 million shares outstanding. Their book value was $33 per share, and the market price was $86.50 per share. The company’s balance sheet shows that the company had $19.7 billion of long-term debt, which was curren..
Sims Corp. will buy back 900 of its 2500 shares outstanding. The return on equity before the buy-back is 14%. The debt-to-equity ratio before the buy-back is 1. Also, the company plans to keep a constant debt level, with an interest rate of 3%. Assum..
Describe in detail the advantages and disadvantages of renting versus owning a home. What is the role of the title search in making a home purchase?
Miller Brothers Hardware paid an annual dividend of $1.65 per share last month. Today, the company announced that future dividends will be increasing by 3.60 percent annually. If you require a 9.6 percent rate of return, how much are you willing to p..
McPherson Enterprises is planning to pay a dividend of $2.25 per share at the end of the year (i.e., D1 = $2.25). The company is planning to pay the same dividend each of the following 2 years and will then increase the dividend to $3.00 for the subs..
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