Answer:
The value of the call option today is $10.19
Explanation:
The value of the call option under the two state stock price model is calculated by calculating the present value of the expected return on the stock based on the price increase and price decrease and the probability of such change in prices. It assumes the price to be such that the price is arbitrage free price.
The return on stock is 131 - 109 = 22 if the prices rise to $131. The option will be exercised in this case.
The return on stock will be 0 in case prices go down to $87 as the option will not be exercised and it will expire worthless.
The expected return is = 22 * 0.5 + 0 * 0.5 = $11
The present value of the return is 11 / (1+0.08) =$10.185 rounded off to $10.19
Thus, the price of the call option today is $10.19
Answer:
The pure price per share of common stock issued by ZZZ is $175
Explanation:
According to the given data we have the following:
Expected dividend next year=D1=$14
Growth rate=g=1%
Expected rate of return=r=9%
To calculate the pure price per share of common stock issued by ZZZ Corporation Pure price of share will be equal to PV of all future dividends.
Therefore, Pure price per share=D1/(r-g)
Pure price per share= $14/(9%-1%)=$175
Answer:
First, a person must not depend on anyone in his work. A person must develop plans for his own development and the ability to do all his work on his own, but sometimes a person may be forced to use the help of others and this is not a mistake. We all need each other, but without using dependence as a permanent habit
Answer: $1,193,838.80
Explanation:
The price of a bond is the sum of the present value of the coupon payments and the face value at maturity.
= Present value of coupon payments + Present value of face value at maturity
First adjust the variables for semi-annual:
Number of periods = 5 * 2 = 10 semi annual periods
Coupon payment = 8% * 1,100,000 * 1/2 years = $44,000
Yield = 6% / 2 = 3%
Present value of coupon payments:
The coupon payments are constant so are an annuity:
= Annuity * Present value of an annuity factor, 10 periods, 3%
= 44,000 * 8.5302
= $375,328.80
Present value of face value
= 1,100,000 * Present value of 1, 3%, 10 periods
= 1,100,000 * 0.7441
= $818,510
Selling price:
= 375,328.80 + 818,510
= $1,193,838.80
Answer:
The standard direct labor rate per hour is 1.3 hours
Explanation:
For computing the standard direct labor rate per hour, we have to use the equation which is shown below:
= Standard production time + allowance for rest periods + setup time
where,
Standard production time is 1 hour per unit
Allowance for rest period is 0.2 hours
Setup time is 0.1 hours
Now put these values to the above formula
So, the answer would be equal to
= 1 hour per unit + 0.2 hours + 0.1 hours
= 1.3 hours
The other information which is given in the question is irrelevant. Thus, it is ignored and therefore, it is not consider in the computation part.
Hence, The standard direct labor rate per hour is 1.3 hours
