A stock that does not pay dividend is trading at $73.1. A riskless bond that will pay $100 after a year is trading at $97. A European call option on the stock with strike price of $64 and one year to maturity is trading at $5.8. Propose an arbitrage strategy and prove that it is an arbitrage strategy.
In: Finance
Consider a bond that pays annual coupons and matures in 5.5 years from today when the last coupon is paid. The principal is $100 and the annual coupon is $10 and the yield to maturity (compounded annually with a 30/360 daycount) is 10%. Find the flat price of the bond today.
In: Finance
A punch-out card contains 100 spaces. One space pays $500, five spaces pay $25, and the others pay nothing. How much should you pay to punch out one space? (Assume that you wish to pay the fair price.)
In: Statistics and Probability
2. TSMC stock has a volatility of 25% with expected return 8% per year. The current stock price is $100 per share. The risk-free interest rate is 2%. What is the Black-Scholes value of an at-the-money European put with 1 year maturity?
In: Finance
(Please include a table with at least 50 data points for the graph. Graph the value of your portfolio as a function of the relevant stock price. Graph for stock prices between 100 and 140.)
In: Finance
An airline charges $2,100 for a first-class roundtrip ticket from Boston to Los Angeles,
and charges $370 for an economy-class roundtrip ticket on the same route. The airline
observes that every seat in economy class is full, and that much of the first-class cabin is
empty. Sketch a graph that represents the supply and demand for first-class roundtrip
tickets in this market. Briefly explain why this first-class ticket market is not in
equilibrium when the daily price of a ticket is $2,100. On your graph, clearly indicate the
gap that represents the size of the shortage or surplus this market is experiencing.
In: Economics
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| Data for Hermann Corporation are shown below: |
| Per Unit | Percent of Sales |
|||
| Selling price | $ | 140 | 100% | |
| Variable expenses | 91 | 65% | ||
| Contribution margin | $ | 49 | 35% | |
Fixed expenses are $88,000 per month and the company is selling 3,000 units per month.
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In: Accounting
Assume that there are two stocks, DELL and P&G, in an Index.
The price of DELL is currently $100 per share, there are 50 shares of DELL stock outstanding, and the return on DELL stock over the next year will be 25%.
The price of P&G is currently $50 per share, there are 100 shares of P&G stock outstanding, and the return on P&G stock over the next year will be 10%.
19) What is the return over the year on a MARKET VALUE-WEIGHTED INDEX?
A. 17.5%
B. 20%
C. 25%
D. 10%
E. NONE OF THE ABOVE (Put the correct answer next to the letter E on the answer sheet.)
20) Which stock, if any, carries more weight when calculating the rate of return using the MARKET VALUE-WEIGHTED INDEX method?
A. DELL
B. P&G
C. THEY CARRY THE SAME WEIGHT
In: Finance
6. Suppose that there are drastic technological improvements in shoe production in Home such that shoe factories can operate almost completely with computer-aided machines. Consider the following data for the Home country: Computers: Sales revenue = ?c?? = 100 Payments to labor = ??? = 50 Payments to capital = ??? = 50 Percentage increase in the price = ∆??⁄?? = 0% Shoes: Sales revenue = ???? = 100 Payments to labor = ??? = 20 Payments to capital = ??? = 80 Percentage increase in the price = ∆??⁄?? = 30% a. Which industry is capital-intensive? Is this a reasonable question, given that some industries are capital-intensive in some countries and labor-intensive in others? b. Given the percentage changes in output prices in the data provided, calculate the percentage change in the rental on capital. c. How does the magnitude of this change compare with that of labor? d. Which factor gains in real terms, and which factor loses? Are these results consistent with the Stolper–Samuelson theorem?
In: Economics
Suppose that there are drastic technological improvements in shoe production in Home such that shoe factories can operate almost completely with computer-aided machines. Consider the following data for the Home country:
Computers Shoes Sales revenue = PCQC = 100 Sales revenue = PSQS = 100 Payments to labor = W LC = 50 Payments to labor = W LS = 10 Payments to capital = RKC = 50 Payments to labor = RKS = 90 Percentage increase in the price = ∆PC PC = 0% Percentage increase in the price = ∆PS PS = 40%
a. Which industry is capital-intensive?
b. Given the percentage changes in output prices in the data provided, calculate the percentage change in the rental on capital.
c. How does the magnitude of this change compare with that of change in the earnings of labor?
d. Which factor gains in real terms, and which factor loses? Are these results consistent with the Stohlper-Samuelson theorem?
In: Economics