Assume no arbitrage unless otherwise noted.

A stock is currently priced at $39.00. The risk free rate is 4.9% per annum with continuous compounding. Every 6 months, its price will either go up by 17% or down by 19%. Consider a European put with strike $42.00 expiring in 12 months.

(a) Using the binomial tree model, compute the price of a European put option at the initial node, the two intermediate nodes, and the three terminal nodes.

Enter the following solutions as dollar values, including dollar symbols ($), to two decimal places.

Note: The solutions to later parts of this problem may require more precision than solutions to earlier parts. Therefore, you need to record your solutions to a higher precision than required for use in subsequent computations in order to avoid rounding errors later on.

Top terminal node:
Middle terminal node:
Lower terminal node:
Upper intermediate node:
Lower intermediate node:
Initial node:

(b) Estimate the Δ of the put at the two intermediate nodes and the initial node using the solutions to part (a)

Enter the following solutions to three decimal places.

Upper intermediate node:
Lower intermediate node:
Initial node:

(c) Estimate the Γ of the put at the initial node using the solutions to part (b)

Enter your solution to three decimal places.

(d) You own 1 put today. Use part (b) to determine how much stock you should buy to be Δ-neutral (that is, to ensure that the portfolio value does not change regardless of where the stock goes to at the intermediate time step 6 months from today).

Enter your solution to three decimal places. Note that a negative answer means selling stocks

Buy ___ shares

(e) Suppose the stock goes up at the intermediate time step. How should you change your position in order to remain Δ-neutral? In other words, how many stocks should you add to your holding from part (d)? This is an example of dynamic hedging.

Enter your solution to three decimal places. Note that a negative answer means selling stocks

Buy___ shares

UBS merges two divisions in pursuit of ultra-rich clients New venture will combine capital-markets teams across wealth management and the investment bank in the U.S.

Explain 3 benefits for such a deal?

b) How can a person with an engineering background be able to work and help in the combined market?

please explain your answer and give examples?

Consider a 30-year adjustable rate mortgage (ARM), which requires the borrower to make monthly payments at the end of each month. The mortgage amount is $432,000 and the APR on the mortgage is 3.65% for the first 10 years and then 3.87% for the next 20 years. Prepare a loan amortization schedule for this mortgage. Assume that the mortgage closing date is October 1, 2018. Among other things, the following columns should be included. (50) (i) Date (ii) Beginning Balance (iii) Payment (iv) Principal (v) Interest (vi) Cumulative Principal (vii) Cumulative Interest (viii) Ending Balance

I keep ending up with the final two payments resulting in a negative ending balance. Shouldn't the ending balance result in 0 exactly after the last payment?

Consider a hypothetical futures contract in which the current price is $82. The initial margin requirement is $5, and the maintenance margin requirement is $2. You go long 20 contracts and meet all margin calls, but do not withdraw any excess margin. The settlement price and spot price look like this:

1. Suppose you receive margin call at the beginning of the day, when your account is equal and less than maintenance margin. Which is the first day that you will receive margin call at the beginning of that day?

2. What is the total amount that you are going to put your account from day 0 to day 6?

3. What is the total loss and profit from day 0 to day 6, if the long holder always stays in the market?

Please do out work

Problem 12-07

Forecasted Statements and Ratios

Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Upton's balance sheet as of December 31, 2016, is shown here (millions of dollars):

Cash $ 3.5 Accounts payable $ 9.0 Receivables 26.0 Notes payable 18.0 Inventories 58.0 Line of credit 0 Total current assets $ 87.5 Accruals 8.5 Net fixed assets 35.0 Total current liabilities $ 35.5 Mortgage loan 6.0 Common stock 15.0 Retained earnings 66.0 Total assets $122.5 Total liabilities and equity $122.5

Sales for 2016 were $300 million and net income for the year was $9 million, so the firm's profit margin was 3.0%. Upton paid dividends of $3.6 million to common stockholders, so its payout ratio was 40%. Its tax rate was 40%, and it operated at full capacity. Assume that all assets/sales ratios, (spontaneous liabilities)/sales ratios, the profit margin, and the payout ratio remain constant in 2017. Do not round intermediate calculations.

If sales are projected to increase by $70 million, or 23.33%, during 2017, use the AFN equation to determine Upton's projected external capital requirements. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.

$ million

Using the AFN equation, determine Upton's self-supporting growth rate. That is, what is the maximum growth rate the firm can achieve without having to employ nonspontaneous external funds? Round your answer to two decimal places.

%

Use the forecasted financial statement method to forecast Upton's balance sheet for December 31, 2017. Assume that all additional external capital is raised as a line of credit at the end of the year and is reflected (because the debt is added at the end of the year, there will be no additional interest expense due to the new debt). Assume Upton's profit margin and dividend payout ratio will be the same in 2017 as they were in 2016. What is the amount of the line of credit reported on the 2017 forecasted balance sheets? (Hint: You don't need to forecast the income statements because the line of credit is taken out on last day of the year and you are given the projected sales, profit margin, and dividend payout ratio; these figures allow you to calculate the 2017 addition to retained earnings for the balance sheet without actually constructing a full income statement.) Round your answers to the nearest cent.

Upton Computers Pro Forma Balance Sheet December 31, 2017 (Millions of Dollars)

Cash $

Receivables $

Inventories $

Total current assets $

Net fixed assets $

Total assets $

Accounts payable $

Notes payable $

Line of credit $

Accruals $

Total current liabilities $

Mortgage loan $

Common stock $

Retained earnings $

Total liabilities and equity $

How do I figure out on a ba ii plus calculator, how to figure how many years it would take ? to pay off a house by making an extra payment or changing the payment all else fixed?

for example if I had a $210,000 house with a 30 year mortgage at 2.25% and my payment is $802.72. if I change my payment to let's say $ 1600, how many years would that take to pay off my loan? and how would I figure that out with any payment change ? Thank you ?

Compute the discounted payback statistic for Project C if the appropriate cost of capital is 8 percent and the maximum allowable discounted payback period is three years. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Problem 12-09
Financing Deficit

Garlington Technologies Inc.'s 2016 financial statements are shown below:

Balance Sheet as of December 31, 2016

Income Statement for December 31, 2016

Suppose that in 2017 sales increase by 5% over 2016 sales and that 2017 dividends will increase to $118,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2016. Use an interest rate of 14%, and assume that any new debt will be added at the end of the year (so forecast the interest expense based on the debt balance at the beginning of the year). Cash does not earn any interest income. Assume that the all new-debt will be in the form of a line of credit. Round your answers to the nearest dollar. Do not round intermediate calculations.

Given the following data for a stock: beta = 1.2; risk-free rate = 3%; market rate of return = 13%; and expected rate of return on the stock = 17%. Then the stock is:

-overpriced

-correctly priced

-underpriced

-cannot be determined

Caspian Sea Drinks is considering the purchase of a new water filtration system produced by Rube Goldberg Machines. This new equipment, the RGM-7000, will allow Caspian Sea Drinks to expand production. It will cost $12.00 million fully installed and will be fully depreciated over a 20 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $3.21 million per year and increased operating costs of $581,786.00 per year. Caspian Sea Drinks' marginal tax rate is 26.00%. If Caspian Sea Drinks uses a 8.00% discount rate, then the net present value of the RGM-7000 is _____.

Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is no planned increase in production. The PJX5 will reduce costs by squeezing more juice from each plum and doing so in a more efficient manner. Mr. Bensen gave Derek the following information. What is the IRR of the PJX5?

a. The PJX5 will cost $2.37 million fully installed and has a 10 year life. It will be depreciated to a book value of $131,746.00 and sold for that amount in year 10.

b. The Engineering Department spent $34,779.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $20,597.00.

d. The PJX5 will reduce operating costs by $345,554.00 per year.

e. CSD’s marginal tax rate is 33.00%.

f. CSD is 74.00% equity-financed.

g. CSD’s 12.00-year, semi-annual pay, 5.31% coupon bond sells for $961.00.

h. CSD’s stock currently has a market value of $20.47 and Mr. Bensen believes the market estimates that dividends will grow at 3.49% forever. Next year’s dividend is projected to be $1.46.

Caspian Sea Drinks is considering the purchase of a new water filtration system produced by Rube Goldberg Machines. This new equipment, the RGM-7000, will allow Caspian Sea Drinks to expand production. It will cost $15.00 million fully installed and will be fully depreciated over a 15 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $2.65 million per year and increased operating costs of $675,018.00 per year. Caspian Sea Drinks' marginal tax rate is 30.00%. The internal rate of return for the RGM-7000 is _____.

Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant and the purchase of the equipment necessary to produce the diet drink will cost $26.00 million. The plant and equipment will be depreciated over 10 years to a book value of $3.00 million, and sold for that amount in year 10. Net working capital will increase by $1.08 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $9.48 million per year and cost $1.74 million per year over the 10-year life of the project. Marketing estimates 11.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 32.00%. The WACC is 15.00%. Find the NPV (net present value).

How would you compare the needs of working capital for an international initiative versus a domestic initiative in business and trade? What are some of the areas where it could be a benefit? a curse?