What is the implied risk-free rate

Assignment Help Financial Management
Reference no: EM13925530

The prices of European call and put options on a non-dividend-paying stock with 12 months to maturity, a strike price of $120, and an expiration date in 12 months are $20 and $5, respectively. The current stock price is $130. What is the implied risk-free rate?

Reference no: EM13925530

Questions Cloud

What are the firm''s major strengths and weaknesses : Calculate the 2013 profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). What can you say about these ratios?
How should kb manager address issue of aging baby boomers : Which do you think are the most important environmental forces for KB Home? Why? Are there environmental forces besides those mentioned that you think KB management needs to focus on?
Natural gas producing firm is exposed to fluctuations : A natural gas producing firm is exposed to fluctuations in market prices of natural gas. If market conditions are favorable (high gas prices) the firm will realize a pre-tax operating profit of $300 million. If market conditions are unfavorable, then..
What is the information ratio of a passive manager : What is the information ratio of a passive manager? What is the information ratio required to add a risk-adjusted return of 2.5 percent with a moderate risk aversion level of 0.10?
What is the implied risk-free rate : The prices of European call and put options on a non-dividend-paying stock with 12 months to maturity, a strike price of $120, and an expiration date in 12 months are $20 and $5, respectively. The current stock price is $130. What is the implied risk..
Equipment is classified into one of eight life categories : Equipment is classified into one of eight life categories and depreciated by formula. Buildings are classified into one of 8 class lives and depreciated by the MACRS table.
Customers declared bankruptcy : customers declared bankruptcy in 2013, what journal entry would be used to write off its $20 balance.
Demonstrate understanding of the legal environment : Can the Australian consumers of the energy drinks you considered in question 1 bring any Australian Consumer Law (ACL) cause of action under Part 3-5 against the manufacturers of those drinks?
A trader has a put option contract to sell : A trader has a put option contract to sell 100 shares of stock for a strike price of $60. What's the effect on the terms of the contract if (a) a $2 cash dividend (b) a 5-for-2 stock split (c) a 5% stock dividend is being paid?

Reviews

Write a Review

Financial Management Questions & Answers

  Receivables investment-what is the days sale outstanding

Snider Industries sells on terms of 3/10, net 30. Total sales for the year are $1,516,000. Thirty percent of the customers pay on the 10th day and take discounts; the other 70% pay, on average, 48 days after their purchases. Assume 365 days in year f..

  Bond valuation-require effective annual interest rate

You are considering a 30-year, $1,000 par value bond. Its coupon rate is 8%, and interest is paid semiannually. If you require an "effective" annual interest rate.

  Obtain information about corporate bonds

Go to a financial Web site, such as finance.yahoo.com, google.com/finance, or moneycentral.msn.com. Obtain information on the yields and maturity for: U.S. treasuries, Municipal bonds, Corporate bonds

  Organizational financials

For this piece of your project, create operational and financial components for the strategic planning process for NURSING HOMES. Consider both your internal and external analyses, but focus on your selected organization's strengths and weaknesses. T..

  Compound an initial lump sum annually instead of monthly

When you compound an initial lump sum annually instead of monthly at the same nominal interest rate over the same three year period, what will happen to the future value? Same question in other words: what happens to the future value if you compound ..

  Use for debt when calculating the cost of capital

DeVille Industrial Machines issued 143,000 zero coupon bonds four years ago. The bonds originally had 30 years to maturity with a 7.3 percent yield to maturity. Interest rates have recently increased, and the bonds now have an 8.4 percent yield to ma..

  Firm uses its excess cash to complete stock repurchase

A firm has a market value equal to its book value. Currently, the firm has excess cash of $700 and other assets of $7,000. Equity is worth $7,700. The firm has 550 shares of stock outstanding and net income of $900. What will the new earnings per sha..

  How long will it take before the client has saved

One of your clients wondering when he has saved up 60 000SEK to make a payment on her house . The client now has 10050SEK saved and expects to save an additional 5000SEK per year at the end of each year. The client is expected to earn 7.25 % annual i..

  Discuss the appropriate discount rate for valuing bond

Discuss the appropriate discount rate for valuing bond. Discuss and elaborate the decision of investing in bond market based on the forecast of interest rate.

  Set up an amortization schedule for the first four months

Consider a $ 15,000 loan with interest at 12 percent compounded monthly and 24 monthly payments. How much will the loan payment be? Set up an amortization schedule for the first four months, indicating the amount and timing of principal and interest ..

  Calculate the effective amount of usd the company will pay

Calculate the effective amount of USD the company will pay for its 100m EUR payable? Assume that importer's cost of capital is 10%.

  A basic interest rate swap is priced as a zero

A basic interest rate swap is priced as a zero net present value transaction. Explain what this means. Use the two year swap data to demonstrate your argument.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd