You are considering an investment that will pay you $20,000 in two years and $40,000 in four years. If investors require a return of 11%, what price should it sell for? Question 7 options: 48,681 42,582 40,668 38,344 46,821
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You are considering an investment that will pay you $20,000 in two years and $40,000 in four years. If investors require a return of 11%, what price should it sell for?
Question 7 options:
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48,681 |
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42,582 |
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40,668 |
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38,344 |
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46,821
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- You are considering an investment that will pay you $1,200 in two year, $2,400 in three years and $3,600 in four years. If investors require a return of 8%, what price should it sell for? Question 2 options: 5,580 4,217 3,908 6,783 4,816What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Buy a stock for $30 a share, hold it for three years, and then sell it for $60 a share (the stock pays annual dividends of $2 a share). Buy a security for $40, hold it for two years, and then sell it for $100 (current income on this security is zero). Buy a one-year, 5 percent note for $1,000 (assume that the note has a $1,000 par value and that it will be held to maturity).Consider a put option on a stock that currently sells for £100, but may rise to £120 or fall to £80 after 1 year. The risk free rate of return is 10%, and the exercise price is £90. (a) Calculate the value of the put option using the risk-neutral valuation relationship (RNVR). Explain the reasoning behind your calculations.
- Question 1 NewCrest is looking to invest at most $500,000. The investment can be divided among three options. The return on each option depends on the economic outlook, which is shown in Table 1. For example, if the economic outlook is bright, investing $1 in option I will generate a gain of $3, and investing $1 in option II will result in a loss of $5. Table 1: Return per dollar invested in the different options Return per dollar invested in option Economic outlook I Bright Gloomy II -5 II 7 3 -2 -3 Axel, a business executive, proposed two alternatives to NewCrest. One is investing $100,000 in option I, $200,000 in II and $150,000 in III. The other is investing $60,000 in option I, $100,000 in II and $125,000 in III. NewCrest takes a conservative approach to decision-making. That is, it chooses the alternati ve that maximizes the minimum return produced by the two outcomes of the economic outlook. Discuss among the two alternatives proposed by Axel, which one NewCrest will choose.…13. You are considering buying a Call Option on XYZ Company stock. XYZ Company stock is currently at $75 per share, and you predict that it will be $50 or $100 in one year. Call Option will support you for XYZ Company stock in buying one year for $65. Based on this information, answer the following questions:A. What is the value of the Call Option if the risk-free interest rate is 3%?B. Give your analysis of the relationship between buying an option with the risk of the company.QUESTION 2 (B). An investor must choose between two options. The first option (A) offers AED 10m for AED 2m a year for 5 years. The second option (B) offers AED 11m of AED 1m a year for four years and AED 7m in year 5. (a). Compare the present value of each option by assuming a range of the required rate of return of the investor, say 8%, 9%, 10%, 11%, and 12%. What is your advice?
- QUESTION 2 (B). An investor must choose between two options. The first option (A) offers AED 10m for AED 2m a yea for 5 years. The second option (B) offers AED 11m of AED 1m a year for four years and AED 7m in year 5. (a). Compare the present value of each option by assuming a range of the required rate of return of t investor, say 8%, 9%, 10%, 11%, and 12%. What is your advice?Question 1 A call option has an implied volatility of 45% and a Vega of $3.2. The call is currently trading at $7.67. What would the price be if implied volatility was to increase to 50%? Please show your calculations. Discuss your result.Suppose you buy a one-year European call option on Apple with an exercise price of $100 and sell a one-year put option with the same exercise price. The current stock price is $100, and the interest rate is 10%. Draw a position diagram showing the payoffs from your investments. How much will the combined position cost you?
- Suppose you are an investor with a choice between three securities that are identical in every way except in terms of their rates of return and risk. Which investment provides the highest expected return? Investment A: total return= 10% with profitability 50% total return= 20% with profitability 50% Investment B: total return= 12% with profitability 50% total return= 18% with profitability 50% Investment A: total return= 5% with profitability 60%Question 5: A call option on a stock that expires in a year has a strike price of $99. The current stock price is $100 and the one-year risk free interest rate is 10%. The price of this call is $6. a) Is arbitrage possible? What is the arbitrage position? b) do you het this minimum? Find the minimum arbitrage profit for this strategy. WhenConsider a put option on a stock that currently sells for £100, but may rise to £120 or fall to £80 after 1 year. The risk free rate of return is 10%, and the exercise price is £90. (c) What is the price of a call option on the same stock with the same exercise price and the same expiration date? Explain the reasoning behind your your calculations.