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A put option is currently selling for $5.7. It has a strike price of $50 and seven months to maturity. The current stock price is $57. The risk-free rate is 4.6 percent, and the stock will pay a $2.7 dividend in two months. What is the price of a call option with the same strike price?
Computing annuity payment: John Harper has borrowed $17,400 to pay for his new truck. The annual interest rate on the loan is 9.4 percent, and the loan needs to be repaid in four payments. What will be his annual payment if he begins his payment begi..
The exercise price of the options is $101 per share, all options are European and the stock does not pay any dividend. The call price is $12 per share and the put price is $5 per share. Both options mature in 1 year. Finally the annual rate of intere..
Consider the following information: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom .20 .31 .41 .32 Good .50 .18 .12 .11 Poor .25 −.04 −.07 −.05 Bust .05 −.15 −.27 −.08 a. What is the varia..
Pierre Imports is evaluating the proposed acquisition of new equipment at a cost of $90,000. In addition the equipment would require modifications at a cost of $10,000 plus shipping costs of $2,000. Calculate the non-operating terminal year cash flow..
Changing technologies, like those you read about in Chapter 4 of your text, are sometimes ahead of laws that could regulate them; for that reason, you may find you have more protection against non-technological crimes and privacy invasions than techn..
Jet Corporation expects an EBIT of $26,500 every year forever. The company currently has no debt, and its cost of equity is 15 percent. The corporate tax rate is 35 percent. Suppose the company can borrow at 10 percent. What will the value of the fir..
Meadow Brook Manor would like to buy some additional land and build a new assisted living center. The anticipated total cost is $29 million. The CEO of the firm is quite conservative and will only do this when the company has sufficient funds to pay ..
You put $9,000 in an account earning 7%. After 3 years, you make another deposit into the same account. Five years later (that is, 8 years after your original $9,000 deposit), the account balance is $23,000. What was the amount of the deposit at the ..
An investment offers a total return of 14 percent over the coming year. Bill Bernanke thinks the total real return on this investment will be only 7.6 percent. Required: What does Bill believe the inflation rate will be over the next year?
Asset 1 and Asset 2 are both risky assets, but Asset 1 is riskier than Asset 2. Specifically, the standard deviation of returns on Asset 1 is twice the standard deviation of returns on Asset 2. What are the possible values of the correlation between ..
Tule Time Comics is considering a new show that will generate annual cash flows of $100,000 into the infinite future. If the initial outlay for such a production is $1,500,000 and the appropriate discount rate is 6 percent for the cash flows, then wh..
The Gibson Guitar Company has a coupon bond outstanding that pays coupon interest of $120 per year and has 8 years to maturity. If the market rate for similar bonds is currently 14 %, what is the bond’s current market value? Also, what is the coupon ..
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