Assume that prices for a non-dividend-paying stock follow the lognormal model. The current price of the stock is 145. The stock has a volatility of 25%. You are given that for a 2-year, at-the-money call. Calculate the expected payoff of this call

Which of the following statement is true? O For any type of derivatives, the payoffs will never be negative For any type of derivatives, the profit will never be negative There is no derivative that offers non-negative payoffs There is no derivative that offers non-negative profit All of the statements above are wrong

If all the individual land parcels in a new housing development are sold for $300,000 each, the developer projects total revenue from land sales will be $120 million. If the land lender requires that their $60 million land loan be completely paid off by the time that 75% of the individual land parcels have been sold, what would be the lender’s minimum release price for each parcel? a. $150,000 b. $200,000 c. $250,000 d.$300,000

Benefits and Costs of Buying vs. Renting Reem & Kareem are trying to decide whether to rent or purchase housing. Reem favors buying and Kareem leans toward renting, and both seem able to justify their particular choice. Reem thinks that the tax advantages are a very good reason for buying. Kareem, however, believes that cash flow is so much better when renting. See whether you can help them make their decision. Does the home buyer enjoy tax advantages? Explain. Discuss Kareem’s belief that cash flow is better with renting. Suggest some reasons why Reem might consider renting rather than purchasing housing. Suggest some reasons why Kareem might consider buying rather than renting housing. Is there a clear-cut basis for deciding whether to rent or buy housing? Explain why or why not.

Consider the case where the left tail of the implied distribution is thinner than that of the log-normal distribution and the right tail of the implied distribution is fatter than that of the log-normal distribution with the same mean and standard deviation. Which of the following statements is correct?     A) The implied volatility of a deep out-of-the money put is greater than the one obtained from the Black-Scholes price.     B) The implied volatility decreases as the strike price increases.     C) The implied volatility of a deep out-of-the money call is smaller than the one obtained from the Black-Scholes price.     D) The implied volatility increases as the strike price increases. Please explain and justify your choice. In your answer, discuss the shape of the relation of implied volatility to the strike price and explain how this is obtained.

Which of the following statements is correct for the Black-Scholes model?     A) The price of an American call written on a stock is: c = SN(d1)-Ke-rTN(d2)     B) The stock price at a future point in time follows a log-normal distribution.     C) The continuously compounded return on the stock follows a log-normal distribution.     D) Black-Scholes prices may allow for arbitrage opportunities. Please explain and justify your choice.

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You are managing a business that design products for specific medical purposes. Your potential demand is very short lived and uncertain. Your production cycle is very long which means you need to have the products ready in advance. If the demand for your product arises (only 30% chance), they will be sold well; if not, the products will remain unsold, and you will need to liquidate them for 500 each. You predict that the demand will be normally distributed with mean= 15000 and standard deviation= 7000. The production cost of your product is, on average, $5500. You will sell your product for $12500. Suppose you make 18000 products, and you get lucky and demand will occur this year. What is your expected profit?

46. You are making several runs of a simulation model,each with a different value of some decision variable(such as the order quantity in the Walton calendarmodel), to see which decision value achieves thelargest mean profit. Is it possible that one value beatsanother simply by random luck? What can you do tominimize the chance of a “better” value losing out toa “poorer” value?

Pls help ASAP