Questions from Corporate Finance

Q: Using the information in Table 4.11, verify that a

Using the information in Table 4.11, verify that a regression of revenue on price gives a regression slope coefficient of about 100,000. Table 4.11:

Q: Compute estimated profit in 1 year if XYZ buys collars with the

Compute estimated profit in 1 year if XYZ buys collars with the following strikes: a. $0.95 for the put and $1.00 for the call. b. $0.975 for the put and $1.025 for the call. c. $1.05 for the put and...

Q: An 8-year bond with 6% annual coupons and a

An 8-year bond with 6% annual coupons and a 5.004% yield sells for $106.44 with a Macaulay duration of 6.631864. A 9-year bond has 7% annual coupons with a 5.252% yield and sells for $112.29 with a Ma...

Q: Repeat the previous problem calculating prices for American options instead of European

Repeat the previous problem calculating prices for American options instead of European. What happens? Previous Problem For a stock index, S = $100, σ = 30%, r = 5%, δ = 3%, and T = 3. Let n = 3. a. W...

Q: You wish to insure a portfolio for 1 year. Suppose that

You wish to insure a portfolio for 1 year. Suppose that S = $100, σ = 30%, r = 8%, and δ = 0. You are considering two strategies. The simple insurance strategy entails buying one put option with a 1-y...

Q: Suppose you are a market-maker in S&R index

Suppose you are a market-maker in S&R index forward contracts. The S&R index spot price is 1100, the risk-free rate is 5%, and the dividend yield on the index is 0. a. What is the no-arbitrage forward...

Q: Using weekly price data (constructed Wednesday to Wednesday), compute historical

Using weekly price data (constructed Wednesday to Wednesday), compute historical annual volatilities for IBM, Xerox, and the S&P 500 index for 1991 through 2004. Annualize your answer by multiplying b...

Q: Use the same inputs as in the previous problem, except that

Use the same inputs as in the previous problem, except that K = $1.00. a. What is the price of a 9-month European put? b. What is the price of a 9-month American put?

Q: A stock purchase contract with a zero initial premium calls for you

A stock purchase contract with a zero initial premium calls for you to pay for one share of stock in 3 years. The stock price is $100 and the 3-year interest rate is 3%. a. If you expect the stock to...

Q: Suppose S (0) = $100, r = 0

Suppose S (0) = $100, r = 0.06, σS= 0.4, and δ = 0. Use equation (20.32) to compute prices for claims that pay the following: a. S2 b. √S c. Sâˆ
...