A company’s assets have a total market value of €400 mil. of which €40 mil. are cash. The Company’s debt amounts to €100 mil. The company has 5 million shares.

a. What is the share price of the company?

b. If the company pays out €40 mil. of dividend, what will be the share price after the dividend payment?

c. Rather than distributing cash dividend, the company repurchases stocks worth €40 mil. What will be share price after the repurchase program?

d. What will the company’s new market debt-equity ratio be after either transaction?

A newly issued bond has a maturity of 10 years and pays a 7% coupon rate (with coupon paymentscoming once annually). The bond sells at par value. Assume par value is equal to $ 100.

a) What are the convexity and the duration of the bond?

b) Find the actual price of the bond assuming that its yield to maturity immediately increases from 7% to 8% (with maturity still 10 years).

c) What price would be predicted by the duration rule? What is the percentage error of that rule?d) What price would be predicted by the duration-with-convexity rule? What is the percentage errorof that rule?

A newly issued bond has a maturity of 10 years and pays a 5.5% coupon rate (with coupon payments coming once annually). The bond sells at par value.
a. What are the convexity and the duration of the bond?
b. Find the actual price of the bond assuming that its yield to maturity immediately increases from 5.5% to 6.5% (with maturity still 10 years). Assume a par value of 100.
c. What price would be predicted by the modified duration rule?
d. What is the percentage error of that rule? What price would be predicted by the modified duration-with-convexity rule? What is the percentage error of that rule?

​(Repurchase of stock​) The Dunn Corporation is planning to pay dividends of ​$520 comma 000. There are 260 comma 000 shares​ outstanding, and earnings per share are ​$4. The stock should sell for ​$49 after the​ ex-dividend date.​ If, instead of paying a​ dividend, the firm decides to repurchase​ stock, a. What should be the repurchase​ price?

b. How many shares should be​ repurchased?

c. What if the repurchase price is set below or above your suggested price in part a​?

d. If you own 100​ shares, would you prefer that the company pay the dividend or repurchase​ stock?

Bull call spread strategy: The current stock price of is $78.91, you buy a call option with the expiration of August 21, with the strike price of 72.50$ with ask $11.30, then sell a call for 82.50$ with bid $5.40. You buy a 44 contracts of each call option, with a multiplier of 100. Net Debit: paying $49,720(1,130*44 contracts) and receiving $23,760(540*44)= $25,960

You liquidate the options before expiration on May 20. The stock price on May 20 is 98$. Show calculations of your profit/loss on each position, and the net profit/loss on the portfolio.

Consider a supply chain consisting of a part supplier, a manufacturer (mfr.), the retailer, and the customer. Suppose the customer’s reservation price of the machine is $200. The retail price is $150. The wholesale price between the mfr. and the dealer is $100. The dealer’s other retail-related cost is $20. The mfr. produces the product at $30 as the production cost and pays the supplier $20 to buy the parts needed. The supplier’s production cost is $10.

Q1. Please calculate each supply chain member’s profit/surplus, and the supply chain surplus.

Q2. What is the relationship between the supply chain surplus and all members’ profit/surplus?   

A newly issued bond has a maturity of 10 years and pays a 5.5% coupon rate (with coupon payments coming once annually). The bond sells at par value.

a. What are the convexity and the duration of the bond?

b. Find the actual price of the bond assuming that its yield to maturity immediately increases from 5.5% to 6.5% (with maturity still 10 years). Assume a par value of 100.

c. What price would be predicted by the modified duration rule?

d. What is the percentage error of that rule? What price would be predicted by the modified duration-with-convexity rule? What is the percentage error of that rule?

Pizza King (PK) and Noble Greek (NG) are competitive pizza chains.  PK believes there is a 30% chance that NG will charge $8 per pizza, a 50% that NG will charge $10 per pizza, and a 20% chance that NG will charge $12 per pizza.  If PK charges price p1 and NG charges price p2, PK will sell 100 + 25(p2 – p1) pizzas. It costs PK $6 to make a pizza. PK is considering charging $7, $8, $9, $10, or $11 per pizza.  To maximize its expected profit, what price should PK charge for a pizza?

A bond trader purchased each of the following bonds at a yield to maturity of 9%. Immediately after she purchased the bonds, interest rates fell to 5%.

What is the percentage change in the price of each bond after the decline in interest rates? Assume annual coupons and annual compounding. Fill in the following table. Do not round intermediate calculations. Round your answers to two decimal places.

1)   Price a call option on Planetary Resources Group stock expires in two periods

With a strike price of $200. The PRG stock is $215 a ton. The price either moves

up with u=1.15, or down with d=1/1.15. The risk-free interest rate is 2%. What is

the value of your option today in period 0?

A)   Recompute the price from above assuming that the risk-free interest rate has

risen to 4%. In one sentence, explain why the price changed the direction it did.

B)   Recompute the price from question 1 assuming that the current price has risen to $230. In one sentence, explain why the price changed the direction it did.

C)   Donets Extraction stock sells for $10. The monthly interest rate is 1%. The

standard deviation of the price of this stock is 100% per year. Use the Black-

Sholes equation to determine the price of a call option with a strike price of 9 that

expires in 6 months? Using Put-Call parity determine the price of a put option on

this stock with a strike of 9 expiring in 6 months.