Questions from Corporate Finance

Q: A stock currently sells for $32.00. A 6

A stock currently sells for $32.00. A 6-month call option with a strike of $30.00 has a premium of $4.29, and a 6-month put with the same strike has a premium of $2.64. Assume a 4% continuously compou...

Q: Suppose the exchange rate is 0.95 $/=C, the

Suppose the exchange rate is 0.95 $/=C, the euro-denominated continuously compounded interest rate is 4%, the dollar-denominated continuously compounded interest rate is 6%, and the price of a 1-year...

Q: Let S = $100, K = $105, r

Let S = $100, K = $105, r = 8%, T = 0.5, and δ = 0. Let u = 1.3, d = 0.8, and n =1. a. What are the premium, ∆, and B for a European call? b. What are the premium, ∆, and B for a European put?

Q: Assuming a $10m investment in one stock, compute the 95

Assuming a $10m investment in one stock, compute the 95% and 99% VaR for stocks A and B over 1-day, 10-day, and 20-day horizons.

Q: Using the same assumptions as in Example 26.3, compute

Using the same assumptions as in Example 26.3, compute VaR with and without the mean, assuming correlations of −1, −0.5, 0, 0.5, and 1. Is risk eliminated with a correlation of −1? If not, why not?

Q: Consider the expression in equation (26.6). What is

Consider the expression in equation (26.6). What is the exact probability that, over a 1-day horizon, stock A will have a loss?

Q: Suppose you observe the following 1-year implied forward rates:

Suppose you observe the following 1-year implied forward rates: 0.050000 (1- year), 0.034061 (2-year), 0.036012 (3-year), 0.024092 (4-year), 0.001470 (5-year). For each maturity year compute the zero-...

Q: Suppose you observe the following continuously compounded zero-coupon bond yields

Suppose you observe the following continuously compounded zero-coupon bond yields: 0.06766 (1-year), 0.05827 (2-year), 0.04879 (3-year), 0.04402 (4-year), 0.03922 (5-year). For each maturity year comp...

Q: If all national markets have market risk, is all market risk

If all national markets have market risk, is all market risk the same?

Q: Explain how the concept of macroeconomic uncertainty expands the scope of analyzing

Explain how the concept of macroeconomic uncertainty expands the scope of analyzing operating exposure.