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Finance
A firm has a weighted average cost of capital of 10 percent. The firm's aftertax cost of debt is 5.8 percent and the cost of equity is 11.8 percent. The tax rate is 34 percent. What is the firm's debt-equity ratio?
Finance
Which of the following statements about interest rate swaps is FALSE?
A) A plain vanilla interest rate swap is a fixed rate for a variable rate swap
B) The parties agreeing to a swap typically make no margin deposit
C) The notional principal amount is used to determine the amount of the interest payments
D) The counterparties exchange the notional principal at initiation and termination while only net
interest rate payments are exchanged on the settlement dates
A) A plain vanilla interest rate swap is a fixed rate for a variable rate swap
B) The parties agreeing to a swap typically make no margin deposit
C) The notional principal amount is used to determine the amount of the interest payments
D) The counterparties exchange the notional principal at initiation and termination while only net
interest rate payments are exchanged on the settlement dates
Finance
1. An investor notices that one Australian dollar is selling for $0.67 in USD. A put option on an
Australian dollar with an exercise price of $0.75 is selling for $0.14. An investor takes a long
position of one Australian dollar and buys a protective put. The profit of the protective put is _____
if the price of one Australian dollar at expiration is $0.70?
2. Suppose the current stock price is $50 and the option exercise prices for both call and put are $47.
The risk-free rate is 5% per annum. Both options mature in one year. The lower bound for a
European put option is _____ and the lower bound for an American call option is _____.
Australian dollar with an exercise price of $0.75 is selling for $0.14. An investor takes a long
position of one Australian dollar and buys a protective put. The profit of the protective put is _____
if the price of one Australian dollar at expiration is $0.70?
2. Suppose the current stock price is $50 and the option exercise prices for both call and put are $47.
The risk-free rate is 5% per annum. Both options mature in one year. The lower bound for a
European put option is _____ and the lower bound for an American call option is _____.
Finance
1. An investor writes a covered call on a $40 stock with an exercise price of $50 for a premium of $2.
The investor’s maximum gain will be _____ and maximum loss will be ______.
2. Consider a European call option on Coca-Cola with exercise price equal to zero that expires in one
month. Assume Coca-Cola pays NO dividends in the next month. The maximum amount that you
would be willing to pay for that option today is ____.
The investor’s maximum gain will be _____ and maximum loss will be ______.
2. Consider a European call option on Coca-Cola with exercise price equal to zero that expires in one
month. Assume Coca-Cola pays NO dividends in the next month. The maximum amount that you
would be willing to pay for that option today is ____.
Finance
Company 1 is planning two new issues of 25-yr bonds. Bond Par will be sold at its $1000 per value, and it will have a 10% semiannual coupon. Bond OID will be an original issue discount bond and it will also have a 25-yr maturity and a $1000 par value, but its semiannual coupon will be 6.25%. If both bonds are to provide investors with the same effective yield, how many of the IOD bonds must the company issue to raise $3,000,000? Disregard floatation costs.
Finance
Who guarantees that a futures contract will be fulfilled?
Finance
2. Commodity futures pricing
A) must be related to spot prices
B) includes cost of carry
C) converges to spot prices at maturity
D) all of the above are true
E) none of the above are true
A) must be related to spot prices
B) includes cost of carry
C) converges to spot prices at maturity
D) all of the above are true
E) none of the above are true
Finance
Valero will pay a $5.00 dividend in one year. It now sells for $50.00 per share with other oil companies in the same industry providing an average return of equity of approximately 15%. What must be the opportunity cost of capital if Valero is plowing back 70% of their earnings back into Retained Earnings?
Finance
Buy 100 shares at $100. Buy 70 call option for $8 to protect the share price going up. If the stock price increased to $120, what would be my overall gain/loss? What is the most I can lose under this call option plan?
Finance
An investor has a 2-stock portfolio with $50,000 invested in Palmer Manufacturing and $50,000 in Nickles Corporation. Palmer’s beta is 1.20 and Nickles’ beta is 1.00. What is the portfolio's beta?
(Points : 4)
0.94
1.02
1.10
1.18
1.26
(Points : 4)
0.94
1.02
1.10
1.18
1.26
