The difference between the underwriters' buying price and the offering price of the securities to the public is called the _.
a
Spread
b
Underpricing
c
Signalling
d
New issue premium
In: Finance
In: Finance
Based on a spot price of $96 and strike price of $98 as well as the fact that the risk-free interest rate is 6% per annum with continuous compounding, please undertake option valuations and answer related questions according to following instructions:
Binomial trees:
Additionally, assume that over each of the next two four-month periods, the share price is expected to go up by 11% or down by 10%.
Note: When you use no-arbitrage arguments, you need to show in detail how to set up the riskless portfolios at the different nodes of the binomial tree.
In: Finance
If the share price is $21.50 and the exercise price and premium of a call option written on that share are $19.90 and $2.00, respectively, what is the time value of the option?
Select one:
$2.00
$0.40
$0.00
$17.90
$1.60
In: Finance
Based on this spot price of 16 and the strike price of 18 as well as the fact that the risk-free interest rate is 6% per annum with continuous compounding, please undertake option valuations and answer related questions according to following instructions:
Binomial trees:
Additionally, assume that over each of the next two four-month periods, the share price is expected to go up by 11% or down by 10%.
a. Use a two-step binomial tree to calculate the value of an eight-month European call option using the no-arbitrage approach. [2.5 marks]
b. Use a two-step binomial tree to calculate the value of an eight-month European put option using the no-arbitrage approach. [2.5 marks]
c. Show whether the put-call-parity holds for the European call and the European put prices you calculated in a. and b. [1 mark]
In: Finance
On March 1, the price of a commodity is $1,000, and the December futures price is $1,015. On November 1, the price of commodity is $980, and the December futures price is $981. A producer of the commodity entered into a December futures contracts on March 1 to hedge the sale of the commodity on November 1. The producer closed out its position on November 1. The hedging futures makes_____.
loss
gain
In: Finance
On March 1, the price of a commodity is $1,000, and the December futures price is $1,015. On November 1, the price is $980, and the December futures price is $981. A producer of the commodity entered into a December futures contracts on March 1 to hedge the sale of the commodity on November 1. The producer closed out its position on November 1. The value of profit/loss (P/L) on the futures is ______. $980+15 or $995 $1015 -1000 or $15 $1015-$981 or $34 $981+15 or $996 $981+$34 or $1015 $980+$34 or $1014
In: Finance
On March 1, the price of a commodity is $1,000, and the December futures price is $1,015. On November 1, the price is $980, and the December futures price is $981. A producer of the commodity entered into a December futures contracts on March 1 to hedge the sale of the commodity on November 1. The producer closed out its position on November 1. The effective price realized is therefore ___________. $1015-$981 or $34 $981+15 or $996 $1015 -1000 or $15 $980+15 or $995 $981+$34 or $1015 $980+$34 or $1014
In: Finance
Suppose m = $300, The price of food is Pf = $3 and the price of “other goods” is Pg =$1.
(a) What is the budget constraint? Draw the budget line on a graph and identify points on each axis. Put food on the x axis (5 points).
(b) Suppose there is a quantity of 30 food stamps issued. Draw the new budget line and show points on each axis. Put food on the x axis (5 points)
In: Economics
As price elasticity of demand increases, the burden of a tax gets _______; as price elasticity of supply increases, the burden of a tax gets _________.
(Here, you can read "bigger" as "heavier" and "smaller" as "lighter" if that helps.)
A. smaller; bigger
B. bigger; smaller
C. smaller; smaller
D. bigger; bigger
In: Economics