Explore BrainMass
Share

# Options / Swaps / Bonds

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

Problem 1
A Call Option on the stock of XYZ Company has a market price of \$9.00. The price of the underlying stock is \$36.00, and the strike price of the option is \$30.00 per share. What is the Exercise Value of this Call Option? What is the Time Value of the Option?

Problem 2
The Exercise (Strike) Price on ABC Company's Option is \$21.00, its Exercise Value is \$23.00, and its Time Value is \$7.00. What is the Market Value of the Option? What is the price of the underlying stock?

Problem 3
Nichols Corporation's value of operations is equal to \$500 million after a recapitalization (the firm had no debt before the recap). It raised \$200 million in new debt and used this to buy back stock. Nichols had no short-term investments before or after the recap. After the recap, wd = 40%. What is S (the value of equity after the recap)

Problem 4
Dye Trucking raised \$150 million in new debt and used this to buy back stock. After the recap, Dye's stock price is \$7.50. If Dye had 60 million shares of stock before the recap, how many shares does it have after the recap.

Problem 5
Company A can issue floating-rate debt at LIBOR + 1%, and it can issue fixed rate debt at 9%. Company B can issue floating-rate debt at LIBOR + 1.5%, and it can issue fixed-rate debt at 9.4%.

Suppose A issues floating-rate debt and B issues fixed-rate debt, after which they engage in the following swap: A will make a fixed 7.95% payment to B, and B will make a floating-rate payment equal to LIBOR to A.

What are the resulting net payments of A and B?

Problem 6
What is the implied interest rate yield on a Treasury Bond (\$100,000) futures contract that settled at 100'24 (or 100 24/32)? If interest rates increased by 0.75%, what would be the contract's new value?

Assume that this is based on 20 Years, with an annual yield of 8%, with semi-annual payments.

Note : Please show all the calculation in excel using formula in cells if applied