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Consider a six-month European put option on one stock. Suppose that the current stock price is 15, the strike price is 18.5, the continuously compounded risk-free rate is 2% per annum, and the volatility of the stock is 10% per annum.
1) Value this option using a two-period binomial tree.
2) Will the value of the option be different if it is an American option?
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What is the current (time 0) value of a share of Highland stock? What value would you project for a share of stock at the beginning of year 3?
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The MM irrelevance capital structure theory proved that a firm's value is unaffected by its capital structure. But their study was based on some strong assumptions that: _____
Which of the following is not a characteristic of common stock:
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You are considering the purchase of a share of Alfa Growth, Inc. common stock. You expect to sell it at the end of one year for $55.35 per share. You will also receive a dividend of $2.30 per share at the end of the next year. If your required return..
Home values in many areas are declining. At the same time, many homeowners have seen their payments increase as their adjustable rate mortgages reset to higher rates. If they are unable to make the higher payments or to refinance at more favourable r..
Walgreen’s stock went from $25 to $28 last year. Walgreen’s paid a 50 cent dividend. What is your holding period return (HPR)?
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