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)

Assume 100% occupancy

The specifics of the opportunity are as follows:

Property purchase price $2,250,000. Loan to Value Ratio (LTV) 80%

Loan Terms: fully amortized over 30 years at 4.25% APR paid monthly

The property offers six recently updated “luxury” apartments. Each apartment has 3 bedrooms and 2.5 baths in 1,800 square feet of living space. Rents are $1,690 per month per apartment. All six units are leased but one of the units only receives half rent because the tenants in that unit are responsible for year round cosmetic maintenance of the walkways and greenspaces and also minor emergency repairs. You plan to invest an additional $150,000 in paid in capital for cosmetic updates on the property and closing fees. The tax rate on the property is 1.75% of the purchase price. For the sake of simplicity will assume that taxes and rents are constant.

1 What is your first year profit (revenues minus expenses) from this investment both in dollars and in rate of return?

Instructions: below is a description of an investment. Set up a spreadsheet for valuing this opportunity using Excel functions to answer the questions given in the bullet points below such that by simply entering the values given in the bullet points in specific cells the values in your model will update and provide correct answers

11. Assume the current selling price of a firm’s stock is: $100. Using the Excel file Dividend Data, compute the firm’s cost of equity using the Gordon dividend model.

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.

Last year, Alpha Company sold 3,600 units of a single product at a price of $100 per unit. The company variable cost per unit was $75, its fixed cost for the year were $40,000.

How many units must ALPHA sell to break even?

What is ALPHA’s operating leverage?

How much will ALPHA need to sell in sales dollars to earn a target profit of $80,000?

If ALPHA spends $18,000 and a proposed marketing campaign, it expects that sales would increase by 15%. Should ALPHA approve the proposed marketing campaign (YES or NO)

If ALPHA drops the unit price to $90, variable costs increase to $80, and fixed costs are reduced by $10,000, how many units will ALPHA need to sell to break even?

et the present price (in dollars) of a stock be S(0) = $100 per share. Suppose its price after time T will be either S(T ) = $110 or $90. (i) Suppose that the risk-free return from time 0 to T is 8%. Find the cost of the call option for the stock with strike price $108 and exercise time T. (ii) Suppose that the risk-free return from time 0 to T is 5%. Find the cost of the call option for the stock with strike price $108 and exercise time T.

You are given the following information:

The current price of copper is $83 per 100 lbs. The term structure of interest rates is flat at 5% per year continuously compounded. Assume there are no costs associated with storing copper and that the trader can borrow and lend at the riskless rate. The convenience yield for all maturities is 7% per year continuously compounded. Consider a forward contract in which the short position has to make two deliveries: 10,000 lbs of copper in one month and 10,000 lbs of copper in two months. The common delivery price is P. That is the short receives P dollars for delivery after one month and another P dollars for delivery after two months. Establish the fair value of this unusual forward contract. That is find the value for P. make sure to define all terms and to carefully explain how you arrived at your answer.

— The stock’s price S is $100. After three months, it either goes up and gets multiplied by the factor U = 1.13847256, or it goes down and gets multiplied by the factor D = 0.88664332. — Options mature after T = 0.5 year and have a strike price of K = $105. — The continuously compounded risk-free interest rate r is 5 percent per year. — Today’s European call price is c and the put price is p. Call prices after one period are denoted by cU in the up node and cD in the down node. Call prices after two periods are denoted by cUD in the “up, and then down node” and so on. Put prices are similarly defined. To create the arbitrage-free synthetic call today, you need to:

Group of answer choices

buy 0.9343 shares of the stock and short sell 93.2677 units of the money market account

buy 0.8585 shares of the stock and short sell 42.2642 units of the money market account

buy 0.4827 shares of the stock and short sell 42.2642 units of the money market account

buy 0.8585 shares of the stock and short sell 85.5777 units of the money market account

please provide explanation

The trading price of the ABC stock has been around $100 per share for the past months, and you believe it is going to stay in that range for the next 3 months. The price of a 3-month put option with a strike price of $100 is $10.

a) (4 points) If the risk-free interest rate is 5% p.a. with continuous compounding, what is the price of a 3-month call option on ABC stock at a strike price of $100 if it is at the money? (The stock pays no dividends.)

b) (6 points) Based on your belief about the future movement of the stock price, what options strategy using a put and a call would you adopt? What is the most money you can make on this position? Explain the reason.

c) (10 points) How can you create a position with a put, a call, and riskless lending (risk-free interest rate is 5% p.a. with continuous compounding) that would have the same payoff as the stock at the expiration date? What is the net cost of establishing that position now?