T-bills currently yield 3.6 percent. Stock in Deadwood Manufacturing is currently selling for $73 per share. There is no possibility that the stock will be worth less than $66 per share in one year. a-1. What is the value of a call option with a $50 exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a-2. What is the intrinsic value? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b-1. What is the value of a call option with a $48 exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-2. What is the intrinsic value? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c-1. What is the value of a put option with a $50 exercise price? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c-2. What is the intrinsic value? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a-1. Call option value a-2. Intrinsic value b-1. Call option value b-2. Intrinsic value c-1. Put option value c-2. Intrinsic value

T-bills currently yield 3.6 percent. Stock in Deadwood Manufacturing is currently selling for $73 per share. There is no possibility that the stock will be worth less than $66 per share in one year. a-1. What is the value of a call option with a $50 exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a-2. What is the intrinsic value? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b-1. What is the value of a call option with a $48 exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-2. What is the intrinsic value? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c-1. What is the value of a put option with a $50 exercise price? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c-2. What is the intrinsic value? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a-1. Call option value a-2. Intrinsic value b-1. Call option value b-2. Intrinsic value c-1. Put option value c-2. Intrinsic value

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Suppose XYZ stock pays no dividends and has a current price of $50. The forward price for delivery in 1 year is $55. Suppose the 1-year eective annual interest rate is 10%. (a) Graph the payo and prot diagrams for a forward contract on XYZ stock with a forward price of $55. (b) Is there any advantage to investing in the stock or the forward contract? Why? (c) Suppose XYZ paid a dividend of $2 per year and everything else stayed the same. Now is there any advantage to investing in the stock or the forward contract? Why?
eBook Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a dividend of $3.00 yesterday. Bahnsen's dividend is expected to grow at 5% per year for the next 3 years. If you buy the stock, you plan to hold it for 3 years and then sell it. The appropriate discount rate is 11%. a. Find the expected dividend for each of the next 3 years; that is, calculate D1, D2, and D3. Note that Do = $3.00. Do not round intermediate calculations. Round your answers to the nearest cent. D1 = $ D2 = $ D3 = $ b. Given that the first dividend payment will occur 1 year from now, find the present value of the dividend stream; that is, calculate the PVs of D1, D2, and D3, and then sum these PVs. Do not round intermediate calculations. Round your answer to the nearest cent. $ c. You expect the price of the stock 3 years from now to be $60.78; that is, you expect P3 to equal $60.78. Discounted at an 11% rate, what is the present value of this expected future stock price? In other…
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You would like to be holding a protective put position on the stock of XYZ Company to lock in a guaranteed minimum value of $102 at year-end. XYZ currently sells for $102. Over the next year, the stock price will increase by 7% or decrease by 7%. The T-bill rate is 4%. Unfortunately, no put options are traded on XYZ Company. Required: a. Suppose the desired put option were traded. How much would it cost to purchase? b. What would have been the cost of the protective put portfolio? c. What portfolio position in stock and T-bills will ensure you a payoff equal to the payoff that would be provided by a protective put with X=102? Show that the payoff to this portfolio and the cost of establishing the portfolio match those of the desired protective put. Complete this question by entering your answers in the tabs below. Required A Required B Required C What portfolio position in stock and T-bills will ensure you a payoff equal to the payoff that would be provided by a protective put with…
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TJMaxx (TJX) stock is currently selling for $796.96. You are thinking about buying it and you hope to sell it for $1141.71 in 4 years. What is the implied return? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate.

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