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trapecia [35]
3 years ago
13

A tree is constructed to value an option on an index which is currently worth 100 and has a volatility of 25%. The index provide

s a dividend yield of 2%. Another tree is constructed to value an option on a non-dividend-paying stock which is currently worth 100 and has a volatility of 25%. A. The parameters p and u are the same for both trees B. The parameter p is the same for both trees but u is not C.The parameter u is the same for both trees but p is not D. None of the above
Business
1 answer:
ZanzabumX [31]3 years ago
4 0

Answer:

A. The parameters p and u are the same for both trees

Explanation:

Calculation of parameters of u(upper limit) and p(lower limit) for both index and stock:

1) INDEX

Current Value: 100

Volatality : 25%

Value can increase upto 100+25% = 125

Value can decrease to 100-25% = 75

U = Value after increase/current value = 125/100 = 1.25

P = Value after decrease/ current value = 75/100 = 0.75

2) STOCK

Current Value: 100

Volatality : 25%

Value can increase upto 100+25% = 125

Value can decrease to 100-25% = 75

U = Value after increase/current value = 125/100 = 1.25

P = Value after decrease/ current value = 75/100 = 0.75

---> The parameters U and P for both index and stock are same. This is because both the index and stock has  same value and same volality rate. Therefore, stock move according to the index.

if index changes by  certain percentage the stock also changes. Here in this case, volatality rate is same for both index  and stock. Hence Parameters U and P are same for Index and Stock.

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The firm receives an average of $20,000 in checks per day. The weighted average delay in clearing the checks received is 3 days.
katrin [286]

Answer:

<u>$26000</u>

Explanation:

from the question;

check per day; 20000

delay: 3 days

checks to pay suppliers; 17000

clearing time 2 days

<u>we first calculate collection flaot:</u>

collection flaot = average amount of check x outstanding days

= 20000 x 3

= 60000

now we have to calculate <u>disbursements float:</u>

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= 34000

with these two values we can get the net float

= collection flaot - disbursements float

= 60000 - 34000

= <u>$26000</u>

5 0
3 years ago
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lutik1710 [3]

The answer is: c) dates peaks and troughs only after the fact.

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One argument to counter such criticism is that the data from the Bureau could be used to make future predicitons and prevent any mistakes in the past from occuring again in the future.


3 0
3 years ago
Read 2 more answers
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Kamila [148]

Answer:

true

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