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Use the following inputs to compute the price of a European call option: S = $50, K = $100, r = 0.06, σ = 0.30, T = 0.01, δ = 0.
a. Verify that the Black-Scholes price is zero.
b. Verify that the vega for this option is zero. Why is this so?
c. Suppose you observe a bid price of zero and an ask price of $0.05. What answers do you obtain when you compute implied volatility for these prices. Why?
d. Why would market-makers set such prices?
e. What can you conclude about difficulties in computing and interpreting implied volatility for very short-term, deep out-of-the-money options?
The ABC Company has a net profit margin of 7.75 percent on sales of $382,846. The company has 17,792 shares of stock outstanding at a market price of $19.1 per share. What is the priceearnings ratio?
You are given the following information about ABC Company: Interest expenses = $26,758Times Interest Earned Ratio = 3.7 timesTax Rate = 30.9%
Two depository institutions have composite CAMELS ratings of 1 or 2 and are "well capitalized." Thus, each institution falls into the FDIC Risk Category I deposit insurance assessment scheme.
In 2-3 pages, discuss who you think the target market is for Alvin and the Chipmuncks. Describe how they can find out what their target customers are looking for in merchandise related to the tour.
Suppose you invested $10,000 eight years ago. The arithmetic average is 10.9 percent and the geometric average return is 10.5%. What is the value of your portfolio today
last year you purchased a stock at a price of 76.00 a share. over the course of the year you received 2.40 in dividends
Bootstrapping allows founders to have more control and give up less of their company to investors. Yet continually living on limited resources can take its toll on entrepreneurs. Examine the pros and cons of both working full time and taking a par..
Complete the Project cash flow statement below and then answer questions. Determine the Net Present Value, IRR and should Voice soft make an investment? why?
Comment on the following proposition: Using floating-rate debt eliminates interest rate risk (the risk that interest payment amounts will change in the future) for both the borrower and the lender.
Calculate the expected value and standard deviation for Firm C’s ROE. ROEA = 10.0%, =σA = 5.5%; ROEB = 12.0%, = σB = 7.7%. Discuss the relative riskiness of the three firms’ returns. (Assume that these distributions are expected to remain constant ov..
Why do we adjust for taxes in determining the cost of debt, but not for the costs of preferred stock and common stock? What is traded off in the trade-off theory of capital structure?
What trades must the investor make now in order to return to an equally-weighted portfolio?
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