Compounding is the process of leaving your money and any accumulated interest in an investment for more than one period, thereby reinvesting the interest.
<h3>What is compounding?</h3>
This can be explained to be a situation where the interest that is made from a sum of money is added into the principal sum of money and reinvested.
The initial principal amount and the interest made after a period when added together is regarded as compounding.
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Answer: $2.1 million
Explanation:
It is mentioned the project is independent of the outcome of general market which means that
=> beta = 0
Using the CAPM formula which is,
r=rt + B* (rm -rf)
=> r = 3% + 0*(12%-3%) = 3%
Expected value of Project in one year = $1 billions * 0.1
Expected value of Project in one year = $100 millions
NPV = Expected value of Project in one year/ (1 + 0.03) - Initial cost
NPV = 100/ (1 + 0.03) - 95
NPV = 97.1 - 95
NPV = $2.1 million
Answer:
he price of a 6-month call option on C.A.L.L. stock is 15.27
Explanation:
The price of a 6-month call option on C.A.L.L. stock at an exercise price of $125 is computed as;
Where as,
C = Value of call,
X = strike price,
P = value of put ,
S = Stock price
Thus,
C + 120 = 135.27
C = 15.27
Answer: Chart of Accounts
Explanation:
Once account numbers have been enabled, the numbers be assigned and edited in the chart of accounts.
To assign the account numbers, one needs to go to the accounting menu and then the chart of accounts will be selected. After that, one will select batch edit which can be seen in the action menu and add the account numbers after which one will then save. In order to see the account numbers,one can then go to chart of accounts
Answer: a. The black-scholes call price for 1 year is 0.
For 10 years it is also 0.
Option price did not change.
b. When δ is 0.001, the black-scholes call price for 1 year is 450.012.
For 10 years it is 450.0012.
The option price changed from 450.012 to 450.0012.
The difference was due to the change of δ value from 0 to 0.001.
Explanation: using the black-scholes equation below option price is callculated based on the given values.
δk/δt+1/2σsquare×Ssquare×δsquare×k/δS+rS×δk/δS-rk=0
By calculations the options prices were obtained for the first value of δ=0 both for 1 year and 10 years and compared with when the value of δ was changed to 0.001
A change in option price was also observed as the δ values changed this lead to the difference observed.
