The following parameters are provided:S = $40, K= $45, r = 5% (continuously compounded), Time to maturity = 6 months, p = $6, Using put-call parity, the price of the call is $1.92 $2.11 $2.47 $2.78
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- The 1-year spot rate is 8%p.a. effective. The term structure of 1-year effective forwardratesisasfollows: attimet=1therateis7%,attimet=2therate is 6%, at time t = 3 the rate is 5%. (a) Determine the term structure of spot rates. (b) A fixed income security pays £10 annual coupons and it is redeemed after 4 years for £100. Compute its price at time t = 0.Assuming monetary benefits of an IS at $85,000 per year (5% inflation), one-time sunk developmental costs of $110,000, recurring expenses of $40,000 (same inflation), a discount rate of 10%, and a 5 year time frame: Determine the NPV of the costs and benefits, ROI, and B/E point. Show all formulas and work for full credit.Indicate whether the given statements is true (T) or false (F): "For a specified value of F at EOY N, P at time zero will be larger for r = 10% per year thanit will be for r = 10% per year, compounded monthly".
- An asset has a current price of ₱80.00 and it has an expected price of ₱95 in 6 months. In yourassessment, the standard deviation (σ) is 0.45. The reference rate is 5.5%. The value to the shortand to the long would be?A company is thinking in investing in one of two potential new products for sale. The projections are as follows: year Revenue/cost £ (Product S) Revenue/cost £ (Product V) 0 (150,000) outlay (150,000) outlay 1 14000 15000 2 24000 25333 3 44000 52000 4 84000 63333 a) Calculate the payback period for both products in years and months, not as a decimal. Please present answer to nearest month.b) Calculate NPV of both products (to 1 d.p.) assuming a discount rate of 7%.c) Which product should be chosen and why?d) Calculate the IRR for Product V only using 1% and 17% to 2 d.p.e) Outline the advantages and disadvantages of the IRR and payback using appropriate academic sources.Consider a contract that pays out $1,103 in 6 months, $139 in 12 months, $72 in 18 months, $5 in 2 years. Price this contract, assuming the following yield curve: time spot rate 6-month 1% 12-month 2% 18-month 2.5% 24-month 2.8% Assume semi-annual compounding. Round your answer to the nearest cent (2 decimal places).
- Kk201. An asset produces $150 in two years, and $250 in four years, and the current price has been calculated toreflect a rate of return of 9% annually. Using the definition that convexity = second derivative of pricedivided by price, find the convexity of this asset evaluated at the annual yield rate of 9%.Suppose we have an asset currently worth $ 2,000. The current continuously compounded rate is 4% for all maturities. Compute the price of 6 – month forward contract on this assetAn asset has a current price of $80 and it has an expected price of $95 in 6 months. In yourassessment, the standard deviation (σ) is 0.45. The reference rate is 5.5percent. The value to the short and to the long would be?
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