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Black-Scholes Model

Conversion price is built into the bond

use the information provided in Table 1. Table 1 Stock Price Call Option Price 25 3.00 30 7.00 35 12.00 40 16.50 45 21.00 50 25.50 1. Consider Purcell Industries with the stock currently trading at $50. You own the call option with a strike price of $35. Complete the table below that shows (a) stock price, (b)

Black-Scholes Option Pricing Model..

What is the value of a 6-month put option with a strike price of $65 given the Black-Scholes Option Pricing Model and the following information? Stock Price $68 Exercise Price $65 Time to expiration .5 Risk free rate .035 standard deviation .15


1. ABC Corporation is evaluating new equipment that will cost $300,000 and another $20,000 for shipping, and $10,000 for installation. The equipment is in the MACRS 3-year class and would be sold after 3 years for $30,000. Use of the equipment will require an additional $20,000 in inventory, and accounts payable will increase

Finance - ABC Corporation, Kanga Resorts, Capra, and Pierre Imports

1) Why is the capital budgeting decision such an important process? Why are managers focused on cash flows rather than on net income while analyzing capital budgeting project? Explain how you would incorporate risk in capital budgeting analysis. 2) What are real options? Why it is important for managers to determine the value

What is the Black-Scholes value for a dividend paying stock?

Question 1: A share of ARB stock sells for $75 and has a standard deviation of return equal to 20% per year. The current risk-free rate is 9% and the stock pays two dividends: 1) a $2 dividend just prior to the option's expiration day, which is 91 days from now (one quarter of a year) and 2) a $2 dividend 182 days from now.


Jared Lazarus has just been named the new chief executive officer of Blubell Fitness Centers, Inc. In addition to an annual salary of $400,000, his three year contract states that his compensation will include 10,000 at-the-money European call options on the company's stock that expires in three years. The current stock price is

Black-Scholes Model

18-4 Black-Scholes Model Assume that you have been given the following information on Purcell Industries: Current Stock Price = $15 Exercise Price Option=$15 Time to maturity of option = 6 months Risk-free rate=10% variance of stock price = 0.12

Investment Opportunities as Real Options: Getting Started

I am trying to understand how Real Options are used as an investment tool for projects. Can you please help me with the Targhee Log Homes Case? The questions are: 1. Do you share Bushong and Sweet's concerns that the analyst has missed something? 2. What would you do differently if you were the analyst?

Wal-Mart Employee Stock option (ESO) in valuation

See the attahced file. I have compiled a very comprehensive excel workbook. I am seeking guidance on the items highlighted in YELLOW: 1. Please double check the WMT FCF Facaset tab - PV of cash flows is 1.3 Trillion seems very high. All forecast are based on own assumptions. 2. on WMT Marginal Rate tESO tab see Yellow ite

MC Questions: equity method, stock options, accounting change, deferred income tax

1. Dane, Inc., owns 35% of Marin Corporation. During the calendar year 2007, Marin had net earnings of $300,000 and paid dividends of $30,000. Dane mistakenly recorded these transactions using the fair value method rather than the equity method of accounting. What effect would this have on the investment account, net income, and

Financial Reporting - Sample Quiz

1) Mast, Inc. reports a taxable and financial loss of $650,000 for 2009. Its pretax financial income for the last two years was as follows: 2007 $300,000 2008 400,000 The amount that Mast,Inc. reports as a net loss for financial reporting purposes is 2009, assuming that it uses the c

Financial Analysis Between Coca-Cola and Pepsi Co

I want a full analysis between Coca-Cola and PepsiCo (2004 only). Please ensure that all calculations are fully explained (details by step) and full explanation of responses to questions. Please address these specific questions - Thank you! 1.What are the primary lines of business of these two companies as shown in their not

Discussing Various Aspects of Accounting

1. As an investor, would you prefer a stock dividend, cash dividend or stock split? Why? How do each of these impact a company's financial statement? What are some benefits of a stock split for a company? What are some benefits for an investor? Why would a company choose one over the other? 2. Should an organization issu

Landry's financial statements

Using Landry's Restaurants, Inc. 2003 Annual Report located in Appendix A of the text, Fundamentals of Financial Accounting, prepare a 1,050-1,750-word paper in which you answer ALL of the following questions, relative to the company and its annual report: a. What does the income statement tell you about the company and its fin

The Black-Scholes Formula

A. Use the Black-scholes formula to find the price of a three-month European call option on a non-dividend-paying stock with a current price of $50. Assume the exercise price is $51, the continuously compounded riskless interest rate is 8% per year, and standard deviation is .4. b. What is the composition of the initial repli

Calculate the Black-Scholes value for a European-style call option with an exercise price of $70. Calculate the price of a 91-day European-style put option on ARB stock having the same exercise price. How would a change in dividend policy impact the call option's value?

A share of ARB stock sells for $75 and has a standard deviation of return equal to 20% per year. The current risk-free rate is 9% and the stock pays two dividends: 1) a $2 dividend just prior to the option's expiration day, which is 91 days from now (one quarter of a year) and 2) a $2 dividend 182 days from now. A) Calc

Black-Scholes model for call value, put value

Use the Black-Scholes model to find the value of a call option from the following: Current stock price is $30 Exercise price is $35 Time to expiration is 3 months = (0.25) Annualized risk free rate is 5% Variance of stock return is 0.49 a. Call Value? b. Use the put call parity relationship and information from abo

The Black-Scholes Model: Option Prices

Construct a spreadsheet that can be used for calculating Black-Scholes call option prices. Before proceeding, verify your model using the following parameters: St = $60.00 K = $60.00 rf = 0.025 T = 0.5 (6 months) σ = 0.35 Ct = $6.2523 1. Using the values of K, rf, T, and σ specified above, tabulate and plot c


I would really like to know the solutions to these problems to make sure that I am doing them correctly. Problems: 1. You intend to purchase a 20-year, $1,000 face value bond that pays interest of $35 every 6 months. If your nominal annual required rate of return is 9.5 percent with semiannual compounding, how much should

Black and Scholes model

Assuming that d1 in the Black and Scholes model for a call option is equal to -1. What will be the price change in the call option if the underlying stock increases by $3.00? What will be the change in the price of a put option on the same stock? Please fully explain your answer.

Options Problem

Please help with the following problem. Evaluate the following statement: "A call option on a portfolio of stocks is more valuable than a portfolio of call options on each of the stocks in the portfolio". II) Use your own data to set up a hypothetical example to substantiate the above statement (NB: you can use any prici

1) Conduct research on two different models used to price call options.

1) Conduct research on two different models used to price call options. Detail each model in a Word document and focus on comparing and contrasting the models. 2) Consider a two-period, two-state world. Let the current stock price be $60 and the risk-free rate be 10%. In each period, the stock price can either go up by 15% o

Derivatives and Black-Scholes Model

1. David is interested in purchasing a European call option on Divine Vines, Inc., a non-dividend-paying common stock, with a strike price of $30 and three months until expiration. Divine's stock is currently trading at $60 per share, and the annual variance of its continuously compounded returns is 0.36. Treasury bills that m