State the generalised law of one price, Finance Basics

Assignment Help:

Question:

a) An oil well now produces 75000 barrels per year. The well will produce for 21 years more, but production will decline by 3.7% per year. Oil prices however, will increase by 2.5% per year. What is today's price of 1 barrel of oil if the present value of the well's production is $50 M? The discount rate is 9.7% compounded continuously.

b) State the generalised law of one price.

c) Show that an option on an index will never be more expensive than the cost of a corresponding collection of options on the individual securities.


Related Discussions:- State the generalised law of one price

Monetary control operations, 'The most significant function of any Central ...

'The most significant function of any Central Bank is to undertake monetary control operations'.   Discuss with specific reference to the Bank of England, highlighting its current

Financial markets, term paper about financial markets in pakistan

term paper about financial markets in pakistan

Overlaps and conflicts, Overlaps and Conflicts Overlaps - whenever...

Overlaps and Conflicts Overlaps - whenever attaining ONE MEANS achieving the another Conflicts - whenever attaining ONE CANNOT permit the achievement of another.

The price jump on its initial day of trading, Following the Initial Public ...

Following the Initial Public Offering (IPO), the shares of Rosetta Stone, the language instruction company, jumped almost 44 percent from an initial price of $18 to $25.55 in late-

What are the advantages of placement, What are the Advantages of placement ...

What are the Advantages of placement Placement has the below benefits: (i) Timing of issue is significant for successful floatation of shares. In a depressed market cond

Comparison between modern and traditional methods, Comparison between Moder...

Comparison between Modern and Traditional Methods Both modern and traditional methods will indicate or show strong weaknesses which like a company cannot use either to choose

Goods and service tax-business activity statement, Asset: - An asset stand...

Asset: - An asset stands for an item of value owned and controlled by an organization which can generate revenue for the organization or can help in generating the organization re

Dividend payout ratio, Dividend Payout Ratio Dividend payout ratio = (...

Dividend Payout Ratio Dividend payout ratio = (DPS/EPS) x 100                                     = Dividend paid/ Earning to ordinary shareholder This is the reci

Role of cma - share prices, Role of CMA - Share Prices Role of CMA in ...

Role of CMA - Share Prices Role of CMA in determination of share prices 1. The CMA does not in any type of way influence share price of quoted companies. 2. The prices o

Write Your Message!

Captcha
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!

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