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Question - You are in discussions to purchase an option on an office building with a strike price of $91 million. The building is currently valued at $84 million. The option will allow you to purchase the building either six months from today or one year from today. Six months from today, accrued rent payment from the building in the amount of $1,030,000 will be made to the owners. If you exercise the option in six months, you will receive the accrued rent payment; otherwise, the payment will be made to the current owners. A second accrued rent payment of $1,030,000 will be paid one year from today with the same payment terms. The standard deviation of the value of the building is 35 percent and the risk-free rate is an annual percentage rate of 4.4 percent. What is the price of the option today using a two-state model with six-month steps?
Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest. How much control does the Fed have over this longer real rate?
Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.
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Term Structure of Interest Rates
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Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR
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Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.
Simple Interest, Compound interest, discount rate, force of interest, AV, PV
CAPM and Venture Capital
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