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Compute for the:
1.) Call Option - Total Value
2.) Call Option - Intrinsic Value
3.) Call Option - Extrinsic Value
Step by step
Solved in 2 steps with 2 images
- Question 3 The table below provides the end-of-year share prices (in GB pence) for Centrica plc and National Express Group plc the end-of-year values for the FTSE 100 Index, which is a proxy for the market portfolio, M. YEAR Centrica plc National Express Group plc Market Portfolio, M 2002 224.7 151.5 199.5 205.8 292.6 187.4 3940.4 2003 4476.9 4814.3 5618.8 6220.8 6456.9 4434.2 5412.9 2004 337.7 2005 2006 2007 2008 235.5 327.6 293.0 256.1 465.2 451.7 545.4 607.1 168.8 207.1 243.6 2009 2010 2011 2012 2013 268.1 317.8 291.6 348.3 309.6 5899.9 5572.3 5897.8 6749.1 216.1 206.5 290.9 2014 6566.1 6242.3 7142.8 2015 292.5 254.9 2016 204.0 301.9 223.5 133.1 136.1 2017 337.8 7687.8 2018 366.2 393.9 6728.1 7542.4 2019 Source: Yahoo Finance. Required: (a) Calculate the systematic risk (82 x o, the non-systematic risk (o2) – (8? x o?) and the total risk (of) of the equity shares of Centrica and National Express Group. (b) Which company's returns are better explained by the market's returns? (c)…Ch 02: Assignment - Risk and Return: Part I CAPM Elements Risk-free rate (TRF) Market risk premium (RPM) Happy Corp. stock's beta Required rate of return on Happy Corp. stock Happy Corp.'s new required rate of return is An analyst believes that inflation is going to increase by 3.0% over the next year, while the market risk premium will be unchanged. The analyst uses the Capital Asset Pricing Model (CAPM). The following graph plots the current SML. Tool tip: Mouse over the points on the graph Calculate Happy Corp.'s new required return. Then, on the graph, use the green points (rectangle symbols) to plot the new SML suggested by this analyst's prediction. RED RATE OF RETURN (Percent) 20.0 16.0 Value 2.0% 12.0 1.0 8.0 8.0% 7.7% 11.0% 12.1% 25.3% eir coordinates. O New SMLQuestion 3 The table below provides the end-of-year share prices (in GB pence) for Centrica plc and National Express Group plc the end-of-year values for the FTSE 100 Index, which is a proxy for the market portfolio, M. | YEAR Centrica plc National Express Group plc Market Portfolio, M 2002 224.7 292.6 187.4 337.7 465.2 451.7 3940.4 151.5 199.5 2003 4476.9 2004 4814.3 2005 2006 205.8 5618.8 6220.8 6456.9 4434.2 235.5 2007 2008 327.6 293.0 256.1 268.1 545.4 607.1 2009 168.8 5412.9 207.1 243.6 216.1 5899.9 5572.3 5897.8 6749.1 2010 2011 2012 2013 317.8 291.6 348.3 309.6 292.5 204.0 223.5 133.1 206.5 2014 290.9 6566.1 6242.3 7142.8 7687.8 6728.1 7542.4 2015 2016 2017 254.9 301.9 337.8 2018 366.2 2019 136.1 393.9 Source: Yahoo Finance. Required: (a) Calculate the systematic risk (B2 x a, the non-systematic risk (o) – (B? x o2) and the total risk (of) of the equity shares of Centrica and National Express Group. (b) Which company's returns are better explained by the market's returns? (c)…
- QUESTION 18 Suppose that the 1-year, 2-year, 3-year, and 4-year spot rates are observed as follows: r1=9.7%, r2=10.2%, r3=10.9%, r4-12.3%, What must be the expected return in year 4 under the liquidity preference theory if the liquidity premium is 0.49%? Oa. 18.63% Ob. 16.61% c. 16.12% Od. 18.14%10 6 points Use the Black-Scholes formula for the following stock: Time to expiration 6 months Standard deviation 53% per year Exercise price $43 Stock price $43 Annual interest rate 3% Dividend 0 eBook Recalculate the value of the call with the following changes: a. Time to expiration b. Standard deviation Print c. Exercise price References d. Stock price e. Interest rate 3 months 25% per year $49 $49 5% Select each scenario independently. Note: Round your answers to 2 decimal places. Value of the Call Option a. C falls to b. C falls to c. C falls to d. C rises to e. C rises to Check my workQ17 The expected dividend of Sony Company for next year has the following probability distributions: 30% OMR 2.000 and 70% OMR 2.890. If the market price of a share is OMR 65.625, what is the required rate of return? a. 25% b. 2% c. 4% d. 8%
- Problem 6-16 Expectations hypothesis and interest rates (LO6-4] Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. (Input your answers as a percent rounded to 2 decimal places.) Interest Rate 1-year T-bill at beginning of year 1 1-year T-bill at beginning of year 2 1-year T-bill at beginning of year 3 1-year T-bill at beginning of year 4 5% 78 9% 11% Expected Return 2-year security 3-year security 4-year security % %Net profit: 85000€ Retained earnings (profit) 31.12.2020: 24.000€Regular Reserve 31.12.2020: 30.000€ Share Capital 31.12.2020: 125.000€ the approved interim dividend for the year 2021 is €20,000, which is due on 31.12.2021 Prepare the Statement of Changes in Equity.QUESTION 3 Current Price Beta Market Risk Premium $50 1.5 5.52% Expected Price in 1 year Expected Dividend T-year T Bond yield What is the stock's alpha? Convert to a percent and then use 2 decimal places. $56.04 $1.94 0.679% QUESTION 4 A mature company will pay a dividend of $3.82 next year and those dividends are expected to grow at 1.78% forever. If the required return is 11.18%, what is the fair value of the stock today?
- QUESTION 9 Use the data in the table shown below. What is the geometric average return over the span of three years? Date 12/31/2018 12/31/2019 12/31/2020 12/31/2021 O a. 28.7% O b.7.5% c.9.5% O d. 8.9% Price $43.00 $45.60 $42.60 $52.50 Dividend $0.80 $0.80 $0.90QUESTION TWO Yield to maturities, par values and market prices for government securities (with annual interests) are given in the following table: Maturity (Years) Yield to maturity Par Value (K) Market Price (K) 1 3% 100 101.25 2 4% 100 103.50 3 5% 100 104.25 Assuming that the yields to maturities are equal to the coupon rates, calculate the one year, two year and three year spot rates.QUESTION 6 A. B. Matur ity (year s) 1 D. 2 3 $114.51 $113.45 $112.508 Spot rate (%) $120.54 1.25 1.50 19 2-years from now 1.908 Using the spot rates, what would be the value of an option-free bond that pays 6% annual coupon? Par value is $100. 1-year Forward rate (%) 1.70 491 0-years from now 1.25 1-year from now 1.75 Cash flow $3 $3 $103
