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Suppose you own 50,000 shares of stock valued at $35.50 per share. You are interested in protecting it with a put that would have a delta of 0.62. Assume, however, that the put is not available or is unfairly priced. Illustrate how to construct a dynamic hedge using a risk-free debt instrument that would replicate the position of having the put. Ignore the cost of the puts. Show how the hedge works by explaining what happens if the stock falls by one dollar.
Suppose a Company is planning a purchase of equipment for $20,000. The equipment is expected to generate net cash inflows of $6,250 for the next five years.
The real risk free rate is 1.5%. Inflation is expected to be 2% for this year and next year, and 3% for every year thereafter. The maturity risk premium is expected to be 0.02 x (t-1)% where t = number of years to maturity. What is the yield on a ..
The Jones Company is having a very good year with sales running 50% above projections. At the end of the year the CFO decides that this is a good time to provide for possible obsolete inventory and sets up a $15 million reserve account for obsolet..
If the dollar is expected to weaken relative to the yen by 4% per annum, what is the Japanese yen required rate of return on the expected yen cash flows?
A company currently sells 60,000 units a month at $10 per unit. The marginal cost per unit is $6. The company is considering raising the price by 10% to $11. If the price elasticity of demand is _______________ in that price range, then profit wou..
Discuss some of the reasons why international trade is more difficult and risky from the exporter's perspective than is domestic trade.
If Joan sold the bond today for $971.38, what rate of return would she have earned for the past year?
The O. Bama Company plans to increase its equity capital by the issue of new shares (SEO) with a subscription ratio of 4:1 (one new shares for four old ones). The current price of the shares is $32, the issue price for the new shares is $25.
They have 3 years to maturity and are currently priced at 94 percent of par value. What is the bonds yield to maturity? What is the current yield? What is the effective annual return? Please give detailed answer, and show work step by step.
assume your firm is zero-growth and pays all its net income in dividends each year also assume your firm can borrow
What would be the debt ratio if the equipment were leased? b. Would the company's financial risk be different under the leasing and purchasing alternatives?
Do you believe maximizing shareholders' wealth is consistent with ethical behavior. What do you think is important in a code of ethics for corporate financial managers? What considerations should a company make when adopting a code of ethics.
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