Questions from Corporate Finance

Q: Zoso Industries has a zero coupon bond issue that matures in two

Zoso Industries has a zero coupon bond issue that matures in two years with a face value of $50,000. The current value of the company’s assets is $34,600, and the standard deviation of the return on a...

Q: Marshall Corp. has a zero coupon bond that matures in five

Marshall Corp. has a zero coupon bond that matures in five years with a face value of $75,000. The current value of the company’s assets is $71,000, and the standard deviation of its return on assets...

Q: In addition to the five factors discussed in the chapter, dividends

In addition to the five factors discussed in the chapter, dividends also affect the price of an option. The Black-Scholes option pricing model with dividends is: All of the variables are the same as...

Q: The put-call parity condition is altered when dividends are paid

The put-call parity condition is altered when dividends are paid. The dividend-adjusted put-call parity formula is: S × e–dt + P = E × e–Rt + C where d is again the continuously compounded dividend yi...

Q: A stock is currently selling for $73 per share. A

A stock is currently selling for $73 per share. A call option with an exercise price of $70 sells for $5.27 and expires in three months. If the riskfree rate of interest is 2.6 percent per year, compo...

Q: A put option that expires in six months with an exercise price

A put option that expires in six months with an exercise price of $45 sells for $4.84. The stock is currently priced at $43, and the risk-free rate is 3.5 percent per year, compounded continuously. Wh...

Q: A put option and a call option with an exercise price of

A put option and a call option with an exercise price of $65 and three months to expiration sell for $5.27 and $1.04, respectively. If the risk-free rate is 3.1 percent per year, compounded continuous...

Q: What are the prices of a call option and a put option

What are the prices of a call option and a put option with the following characteristics? Stock price = $58 Exercise price = $60 Risk-free rate = 2.7% per year, compounded continuously Maturity = 4 mo...

Q: What are the deltas of a call option and a put option

What are the deltas of a call option and a put option with the following characteristics? What does the delta of the option tell you?

Q: You own a lot in Key West, Florida, that is

You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1.35 million. Over the past five years, the price of land in the area has increased 7 percent per yea...