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Forward Contract Delivery

A company that is uncertain about the exact date when it will pay or receive a foreign currency may try to negotiate with its bank a forward contract that specifies a period during which delivery can be made. The company wants to reserve the right to choose the exact date to fit in with its own cash flows. Put yourself in the position of the bank. Generally, how woul you price the product that the company wants?

Subject:

Business

Topic:

Finance

Posting ID:

8399

OTA ID:

103139

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Call/Put Options, Net Present Value, Put-call parity

1. Applied Materials' long-term call options with a maturity of two years and an exercise price of $30 are selling for $3. AMAT's current stock price is $20 and it not expected to pay a cash dividend over the next two years. Assume an annual risk-free rate of 1.5 percent. (a) Is the call option in or out of the money? (b) What would be the value of an AMAT put with the same maturity and exercise price? (c) Is the put in or out of the money? (d) What is the implied volatility of AMAT? [Use the Black-Scholes spreadsheet model I sent you to answer this - it should take only a couple of minutes if you followed what was going on with that model. Attach a printout of the results.] 2. Y... click for more

Subject:

Business

Topic:

Finance

Posting ID:

8610

OTA ID:

103477

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Option Pricing: Suppose that C1, C2 and C3 are the prices of European call options with strike prices X1, X2 and X3, respectively, where X3>X2>X1 and X3-X2=X2-X1. All options have the same maturity. Show that C2 is less than or equal to 0.5(C1+C3)

Suppose that c1, c2 and c3 are the prices of European call options with strike prices X1, X2 and X3, respectively, where X3>X2>X1 and X3-X2=X2-X1. All options have the same maturity. Show that C2 is less than or equal to 0.5(C1+C3) (Hint: Consider a portfolio that is long one option with strike price X1, long one option with strike price X3, and short two options with strike price X2.)

Subject:

Business

Topic:

Finance

Posting ID:

8958

OTA ID:

103477

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Calculation of Internal rate of return (IRR)

'Using the GEICO dividend Payment history in Exhibit 8 of the case, calculate the IRR on Berkshire's $45.7M investment in GEICO (assuming it was all)in 1976 which grew in value to $1.909 billion by 1994.' I'd like a detailed explanation of how to make the calculation with an example using very similar (or preferably the same)figures to those shown in the case

Subject:

Business

Topic:

Finance

Posting ID:

9119

OTA ID:

101733

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Critique of Warren Buffett's investment philosophy

Critically assess the eight major elements of Buffett's investment philosophy and explain where you gree and disagree with them.

Subject:

Business

Topic:

Finance

Posting ID:

9123

OTA ID:

103477

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