Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Question:
a) A bank lends you $1750 at an initial nominal yearly interest rate of 7.5% compounded semi-annually. However, the interest rate will rise to 9.2% after the first year. You repay $580 both after the first year and halfway through the second year and wish to repay the rest after the third year.
i. What is the effective interest rate of the first year?
ii. Calculate the final payment.
b) Consider the n periods stock option model where the nominal interest rate is r per period. Let be the initial price of the stock, and for i = 1,2,4, n, let S(i) be its price at i time periods later. Suppose that S(i) is either u S(i-1) with probability p or d S(i-1) with probability 1-p, where u=1.25 and d=0.8.
i. Give appropriate bounds for the nominal interest rate, in order to get risk-neutral probabilities. ii. If r = 8%, what are the risk-neutral probabilities p and 1-p when S=$120? iii. Calculate the one period European call option with strike price $105. iv. Calculate the one period European put option with strike price $120. v. Calculate the two period European call option with strike price $125.
Prudence buys a bond in EUR when it issued by the French government and inflation linked. It offers a 2% yearly coupon. She holds it for five years. Par value: EUR
Sapp Trucking's balance sheet shows a total of noncallable $45 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 6.00%. This debt currently has a marke
investment procedure of mutual fund
Stock Market Index Definition of Stock Market Index An index is a numerical figure that measures relative change in variables between two type of durations. Examples
Cost of Redeemable Debentures and Preference Shares Redeemable fixed return securities have an exact maturity period. The cost of those securities is called redemption yield
An insurance company offers you and end of year annuity of $48,000 per year for the next 20 years. They claim your return on the annuity is 9%. What is the most you would be willin
Legal Rules - Factors Influencing Dividend a) Net purchase rule States that dividend may be paid from company's profit either past or present. b) Capital impairment r
Define the direct finance and indirect finance in markets. In direct finance, borrower-spenders borrow funds directly by lenders into the financial markets through selling them
What are some good examples of C.O.L.A?
Based on the example in Lesson 2, compute your quarterly interest for three years if you deposit $500 at 8 percent, compounded quarterly. Remember to divide the 8 percent by 4 to g
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!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd