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Suppose today s stock price of Book.com is $100. With probability 60% the price will rise to $130 in one year and with probability 40% it will fall to $80 in one year. A European put option with a strike price of $90 and a time to expiration of one year sells at $4. (a) What is the one-year risk free rate implied by no-arbitrage (hint draw a binomial tree as we did in class)? (b) What would be the no-arbitrage risk free rate if with a probability of 50% the price increases and with a probability of 50% it decreases, keeping all other values constant? Explain! "
Jo's Coffee corporation have two stores in Arizona. Their corporate office is planning eliminating the one of their stores due to declining sales.
What do we mean by "Optimal Capital Structure" and what's the relationship between Optimal Capital Structure and Cost of Capital?
Atlanta Cement, Inc. buys on terms of 2/15, net 30. It does not take discounts, and it typically pays 115 days after the invoice date. Net purchases amount to $720,000 per year. What is the nominal annual percentage cost of its non-free trade cred..
How much money does Sonia require to accumulate through making equal, annual, end-of-year investments to reach her goal of $250,000? How much should Sonia deposit annually to accumulate at end of year 15 the sum calculated in part a?
Describe how the degree of operating and financial leverage can change the profitability of the firm when sales levels change significantly
The cost to perform tasks increases with the number of tasks you perform. The first task costs you $6 to perform and increases by $3 thereafter, i.e., the second task costs $9. What is the maximum net benefit you can achieve?
Illustrate what is the geometric return. Illustrate what is the sample standard deviation of the above returns.
Teldar's post-merger beta is estimated to be 1.7, and its post-merger tax rate would be 35%. The risk-free rate is 6%, and the market risk premium is 5.5%. What is the value of Teldar to Gekko Properties?
You borrow $1,000 from a friendly loan shark, undertaking to pay back $1,100 in 12 equal installments of $91.67. What rate of interest have you been charged?
Define every part of a financial plan and discuss the importance of these components.
In the following given questions the potential investment has following range of possible outcomes and probabilities: 10% probability of a -20 percent return, 40% probability of a 15 percent return, 40% probability of a 25 percent return,
If the tax rate is 40 percent, what is the annual OCF for the project?
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