Assume that a bond will make payments every six months as shown
on the following timeline (using six-month periods):The timeline starts at Period 0 and ends at Period 50. The
timeline shows a cash flow of $ 20.92 each from Period 1 to Period
49. In Period 50, the cash flow is $ 20.92 plus $ 1,000.Period0124950Cash Flows$20.92$20.92$20.92$20.92+$1,000a. What is the maturity of the bond (in years)?b. What is the coupon rate (as a percentage)?c. What is the face value?
A stock price is currently $100. Over each of the next two
six-month periods it is expected to go up by 10% or down by 10%.
The risk-free interest rate is 8% per annum with continuous
compounding. What is the value of a one-year European call option
with a strike price of $100 using a two-step Binomial tree? (Draw
the tree)
A stock price is
currently $100. Over each of the next two six-month periods, it is
expected to go up by 10% or down by 10%. The risk-free interest
rate is 10% per year with semi-annual compounding.
Based on no
arbitrage principle and riskless portfolio we can construct along
the above binomial tree, briefly discuss how we can hedge risk if
we write a European put option with an exercise price of $101 and
1-year maturity.
Rader Tire has the following results for the last six periods.
Calculate and compare the betas using each index. Do not round
intermediate calculations. Round your answers to three decimal
places.
RATES OF RETURN
Period
Rader Tire (%)
Proxy Specific Index (%)
True General Index (%)
1
29
14
16
2
13
12
12
3
-11
-7
-9
4
18
12
20
5
20
20
26
6
-5
-8
0
βusing proxy:
βusing true:
If the current period return for...
A stock price is currently $100. Over each of the next two
six-month periods it is expected to go up by 10% or down by 8%. The
risk-free interest rate is 8% per annuum with continuous
compounding. What is the value of a one-year European call option
with a strike price of $105?
A stock price is currently $200. Over each of the next two
six-month periods it is expected to go up by 10% or down by 10%.
The risk-free interest rate is 6% per annum with continuous
compounding. What is the value of a one-year European call option
with a strike price of $200?
Que: Technology has changed our lives in many ways. Think of a
development in technology, such as the widespread use of cellular
phones or the availability of the Internet. Write an essay in which
you explain the causes and effects of this development on our
lives.
(Answered need to be in soft copy only)