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Akimi4 [234]
3 years ago
14

A stock is currently priced at $52.50 a share. One year from now, the stock price is expected to be either $54 or $60 a share. T

he risk-free rate of return is 4 percent. What is the value of a 1-year call option with an exercise price of $55
Business
1 answer:
oee [108]3 years ago
7 0

Answer:

Value of 1-Year option=$0.48

Explanation:

First, we have to calculate the present value of share being priced at $54 after one year,which shall be calculated as follow:

Present value of share=54(1+4%)^-1

                                     =$51.92

Now we have to calculate the number of options which will be required to exercise for one share:

Number of options=(60-54)/(5-0)=1.2

Finally, we have to calculate the value of 1-year call options which shall be calculated as follow:

Current price of share=Number of options required for one share*Value of 1-year option+Present value of share

52.50=1.2*value of 1-Year option+51.92

1.2*value of 1-Year option=0.58

Value of 1-Year option=$0.48

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Assume your university earns an average rate of return of 5.65 percent on its endowment funds. If a new gift permanently increas
Dennis_Churaev [7]

Answer:

The amount of the gift is 566,371.6814

Explanation:

Average rate of return = Average net profit / average investment

Average rate of return = 5.65% (5.65/100 = 0.0565)

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average investment =  unknown

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Average rate of return = Average net profit / average investment

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cross multiply

0.0565 x = 32,000

divide both sides by 0.0565

x = 32,000/0.0565

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x = 566,371.6814

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6 0
3 years ago
Jose owns an ice cream and frozen treat restaurant and is considering adding new menu items. He recently met with the representa
Monica [59]

Answer:

A. Modified rebuy

Explanation:

There are three types of buying situation:

1. Modified rebuy

2. Straight rebuy

3. New task

1. Modified rebuy: This is a buying situation in which an individual or organisation buys goods that have been purchased previously but changes either the supplier or some other element of the previous order. It is a buying situation in which the buyer wants to modify product specifications, prices, terms, or suppliers.

2. Straight rebuy: It is also known as Extensive problem solving situation. Customers are aware of his or her choices, what they are searching for, his/her needs which is based on personal experience of the customer or friends and families.

3.The new task: This is a business buying situation in which the buyer purchases a product or service for the first time. The buyer has no past experience about the products. It takes a longer time for the buyer to decide because of the risk involved.

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True

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So, in the long run. Prices will end up to fall as a result, until it stabilizes on average.

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Which of the following statements about the impact of scarcity in every economic system is correct?
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A

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