Answer:
cognitive dissonance
Explanation:
Based on the scenario it can be said that Joe is probably helping his clients deal with any cognitive dissonance they might be experiencing. This term refers to a specific situation that involves conflicting attitudes, beliefs or behaviors. By sending his clients this information he is getting rid of the misconceptions or wrong beliefs that they may have regarding crash-safety.
The answer is a definite NO. No one should EVER cash in their 401(k) to pay off debt. You will never be able to recover from the loss of compounding interest if you take out money from your retirement account. This money should be saved for retirement or EXTREME emergencies.
Im this case, Austin should take the amount of his raise and use that to start paying down his debt FASTER.
Answer:
Contract 2 offers the most value.
Explanation:
a) Data and Calculations:
Payment terms of the contracts:
(dollars in millions)
Year Contract 1 Contract 2 Contract 3
1 $1.50 1.0 3.5
2 $1.50 1.5 0.5
3 $1.50 2 0.5
4 $1.50 2.5 0.5
Discount rate = 12%
Present value of Contract 1:
PV annuity factor at 12% for 4 years = 3.037
PV annuity of $1.50 = $1.50 * 3.037 = $4.5555 or $4,555,500
Present value of Contract 2:
$1.0 * 0.893 = $0.893
$1.5 * 0.797 = 1.1955
$2 * 0.712 = 1.424
$2.5 * 0.636 = 1.59
Total = $5.1025 or $5,102,500
Present value of Contract 3:
$3.5 * 0.893 = $3.1255
$0.5 * 0.797 = 0.3985
$0.5 * 0.712 = 0.356
$0.5 * 0.636 = 0.318
Total = $4.198 million or $4,198,000
Answer:
$13.64
Explanation:
Given:
Exercise price,X = $100
Current price = $100
Value when price is up, uS = $120
Value when price is down, dS= $80
Risk free interest rate = 10%
First calculate hedge ratio, H:
Where,
Cu = uS - X
= 120 - 100
= $20
A risk free portfolio involves one share and two call options.
Find cost of portfolio:
Cost of portfolio = Cost of stock - Cost of the two cells.
= $100 - 2C
This portfolio is risk free. The table below shows that
_______________
Portforlio 1:
Buy 1 share $80; Write 2 calls: $0; Total: ($80 + 0) $80
____________________
Portforlio 2:
Buy 1 share: $120; Write 2 calls: -$40; Total: ($120 - $40) $80
Check for oresent value of the portfolio:
Present value
Value = exercise price - value of option
$72.73 = $100 - 2C
Find call option, C
Call option's value = $13.64