User Account

All Pages

What is the risk-free interest rate

Assignment Help Financial Management
Reference no: EM131317548

You buy a share of stock, write a 1-year call option with strike price X = $100 and buya 1-year put option with strike price X = $100. The net outlay required to establish this portfolio is $97. The stock pays no dividends. What is the risk-free interest rate?

Also,

A stock's price is 100. It is expected to pay a dividend of $2 per share at year-end. Anat-the-money European put option with 1 year maturity sells for $7. If the annual interest rate's 5%, what should be the price of an "at-the-money" European call option on the stock with 1 yr maturity.

Reference no: EM131317548

Questions Cloud

What can you diversify : What can You Diversify? If portfolio risk equals market risk, can the portfolio risk be diversifiable?
Calculate the annual interest paid each year : Calculate the annual interest paid each year over the term of the loan, assuming that the payments are made at the end of each year.
Beta coefficient important when constructing a portfolio : What Makes a Beta Coefficient so Great? What makes a beta coefficient important when constructing a portfolio?
Find the voltage regulation : A 9 kVA, 208 V (L-L), 3-phase Y connected stator, synchronous generator has a stator resistance of 0.1 ohm per phase, and a synchronous resistance of 5.6 ohm per phase
What is the risk-free interest rate : You buy a share of stock, write a 1-year call option with strike price X = $100 and buya 1-year put option with strike price X = $100. The net outlay required to establish this portfolio is $97. The stock pays no dividends. What is the risk-free i..
Profit margin and debt ratio-liabilities-to-assets ratio : Profit Margin and Debt Ratio Assume you are given the following relationships for the Haslam Corporation: Sales/total assets 2.3 Return on assets (ROA) 2% Return on equity (ROE) 8% Calculate Haslam's profit margin. Calculate Haslam's liabilities-to-a..
Hollywood studios target debt-to- equity ratio : Hollywood Studios has a WACC of 8.65%. The company's cost of equity is 11% and its cost of debt is 6%. The tax rate is 35%. What is Hollywood Studios' target debt-to- equity ratio?
Explain the key way in which your selected organization : From the e-Activity, explain the key way(s) in which your selected organization / agency uses business intelligence in order to gain a competitive advantage. Next, speculate on the technological limitations regarding data, software, and hardware t..
Determine the terminal distribution of the asset price : Consider a call option for an asset with the following parameters: Determine the terminal distribution of the asset price (hint: use binom.dist function in excel). Describe the distribution (mean, standard deviation, shape, ...).

Reviews

Write a Review

Financial Management Questions & Answers

  Use the amount in the money market account for down payment

You intend to purchase a new car upon graduation in two years. It will have a cost of $29,381, including all extra features and sales tax. You just received a $3,000 pre-graduation gift from your rich uncle that you intend to deposit in a money marke..

  The alternatives from both financial and tax standpoint

Kathy Waterhouse has $750,000 to invest and has been approached with two alternatives. Since Kathy knows nothing about the world of “high finance” she has asked you to analyze these two alternatives. Today is January 1, 2015. Kathy is single and is i..

  Compare the risk of the cd with the risk of the bond

Grandpa Russ thinks he needs a fixed income for the next 10 years. He currently has $10,000 in CDs, which are maturing at the end of this month. The CDs can be renewed for one year at 4.5 percent. What is the maximum price you should tell Grandpa to ..

  Made the first payment

You borrowed $8,000 at a rate of 7.5% and must repay it in 5 equal payments at the end of each of the next 5 years. How much would you still owe at the end of the first year, after you have made the first payment?

  Quarterly coupon rate has yield to maturity

A bond with a 12 percent quarterly coupon rate has a yield to maturity of 16 percent. The bond has a par value of $1,000 and matures in 20 years. Based on this information, what is a fair price of this bond?

  Challenges of cost-effectiveness ratio rankings

What are some of the challenges of cost-effectiveness ratio rankings? What are some of the benefits of using a risk-adjusted measure for comparing cost-effectiveness?

  What is the operating cash flow for the project in year

You are evaluating a project for The Tiff-any golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Tiff-any to be $490 per unit and sales volume to be 1,000 units in year 1; 900 units in year 2; and 1,325 units in ye..

  Consider the calculation of an external rate of return

Consider the calculation of an external rate of return (ERR). The positive cash flows in the cash flow profile are moved forward to t = n using what value of i in the (F/P, i, n-t) factors? A) 0 B) the unknown value of ERR (i') C) MARR D) IRR

  What rate per year are you being offered

An investment offers to triple your money in 36 months (don’t believe it). What rate per year are you being offered?

  What is the alpha for the fad followers

Assume that the economy has three types of people. 20% are fad followers, 70% are passive investors, and 10% are informed traders. The portfolio consisting of all informed traders has a beta of 1.2 and an alpha of 2.86%. What is the alpha for the fad..

  Effective in creating and monitoring an operating budget

Discuss which financial management practices are most effective in creating and monitoring an operating budget.

  Correct valuation equation for this bond

Dizzy Corporation’s 10-year semi annual bond bearing a coupon rate of 12% is currently selling for $950. Given this information, which of the following is the correct valuation equation for this bond? Note: PVIFA(r,t) = [{1-1/(1+r)t}/r] and PVIF(r,t)..

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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