Q: Suppose that x is the yield on a perpetual government bond that
Suppose that x is the yield on a perpetual government bond that pays interest at the rate of $1 per annum. Assume that x is expressed with continuous compounding, that interest is paid continuously on...
See AnswerQ: ‘‘Stock option grants are good because they motivate executives to act
‘‘Stock option grants are good because they motivate executives to act in the best interests of shareholders.’’ Discuss this viewpoint.
See AnswerQ: ‘‘Granting stock options to executives is like allowing a professional footballer
‘‘Granting stock options to executives is like allowing a professional footballer to bet on the outcome of games.’’ Discuss this viewpoint.
See AnswerQ: Why did some companies backdate stock option grants in the United States
Why did some companies backdate stock option grants in the United States prior to 2002? What changed in 2002?
See AnswerQ: In what way would the benefits of backdating be reduced if a
In what way would the benefits of backdating be reduced if a stock option grant had to be revalued at the end of each quarter?
See AnswerQ: Explain how you would do an analysis similar to that of Yermack
Explain how you would do an analysis similar to that of Yermack and Lie to determine whether the backdating of stock option grants was happening.
See AnswerQ: On May 31 a company’s stock price is $70. One
On May 31 a company’s stock price is $70. One million shares are outstanding. An executive exercises 100,000 stock options with a strike price of $50. What is the impact of this on the stock price?
See AnswerQ: A portfolio is currently worth $10 million and has a beta
A portfolio is currently worth $10 million and has a beta of 1.0. An index is currently standing at 800. Explain how a put option on the index with a strike price of 700 can be used to provide portfol...
See AnswerQ: Show that, if C is the price of an American call
Show that, if C is the price of an American call with exercise price K and maturity T on a stock paying a dividend yield of q, and P is the price of an American put on the same stock with the same str...
See AnswerQ: Show that a European call option on a currency has the same
Show that a European call option on a currency has the same price as the corresponding European put option on the currency when the forward price equals the strike price.
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