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You buy a share of stock, write a one-year call option with a strike price X = $11, and buy a one-year put option with a strike price X = $11. Your net initial cost to establish the entire portfolio is $10.50. What must be the risk-free interest rate from now until the options maturity date? The stock pays no dividends. (Do not round intermediate calculations. Enter your answer as a percentage rounded to two decimal places.)
Risk-free rate %
A stock has a beta of 1.25, the expected return on the market is 12 percent, and the risk-free rate is 2 percent. What must the expected return on this stock be?
Primrose Corp has $20 million of sales, $3 million of inventories, $2 million of receivables, and $1 million of payables. Its cost of goods sold is 75% of sales, and it finances working capital with bank loans at an 9% rate. What is Primrose's cash c..
Ghost Rider Corporation has bonds on the market with 10 years to maturity, a YTM of 7.5 percent, and a current price of $938. What must the coupon rate be on the company's bonds?
Accurately derived the formula to determine the increase in the annual after-tax profits by selecting the optimal transfer price and accurately calculated the optimal transfer price.
Assume that you are an intern with the Brayton Company, and you have collected the following data: The yield on the company's outstanding bonds is 7.75%; its tax rate is 40%; the next expected dividend is $0.65 a share; the dividend is expected to gr..
A loan of 100,000 has payments at the end of each month for 12 years. For the first 6 years the payments are Z each month, and for the final 6 years the payments are 2Z each month. Interest is at a nominal annual rate of 12% compounded monthly. Find ..
What is the current price for a General Motors 6% corporate bond with 10 years to maturity if the market rate of interest for similar bonds is 7%? What would the current price be if the market rate of interest drops to 4%?
Then calculate the debt ratio of a service-oriented company, such as Cognizant Technology Solutions. Based on what you learned about leverage in this chapter, what would account for the difference in their debt ratios?
Theo is a consultant who earns 72,000$ annually. His wife, Julia is a homemaker and theey have one child, Ben. Theo is covered by 200,000$ life insurance policy. The couple assumes an annual inflation rate of 3%. How would you design a finance plan f..
Prepare a brief report (3–5 paragraphs) on how equity financing compares to debt financing. What factors need to be considered when choosing an appropriate method? What advantages/disadvantages exist with each type?
Love Co. (a SWISS firm) is planning to invest CHF 2.5 million in a project in Denmark that will exist for one year. Its required rate of return on this project is 18%. It expects to receive cash flows of 2 million euros in one year from this project...
FUTURE PRICE A bond has a $1,000 par value, 14 years to maturity, and a 6% semiannual coupon and sells for $975. Assume that the yield to maturity remains at 6.27% for the next 2 years. What will the price be 2 years from today? Round to TWO decimal ..
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