Consider a 3-month European put option on a non-dividend-paying stock. The current stock price is $52, the strike price is $50, the risk-free interest rate is 12% per annum, and the volatility is 30% per annum. What is the price of the put according to the Black-Scholes-Merton model?
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Consider a 3-month European put option on a non-dividend-paying stock. The current stock price is $52,
the strike price is $50, the risk-free interest rate is 12% per annum, and the volatility is 30% per annum.
What is the price of the put according to the Black-Scholes-Merton model?
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- You would like to buy a house that is currently on the market at $85,000, but youcannot afford it right now. However, you think that you would be able to buy it after 4years. If the expected inflation rate as applied to the price of this house is 5% per year,what is its expected price after four years?Salalah Oil,has a cost of equity capital equal to 22.8 percent. If the risk-free rate of return is 10 percent and the expected return on the market is 18 percent, then what is the firm's beta.Scenario Your corporation has just approved an 8-year expansion plan to grow its market share. The plan requires an influx of cash in each of the 8 years. Management wants to develop a financial plan to ensure the cash needed for the expansion will be available at the beginning of each of the 8 years. The corporation has the following investment options: Security Price per unit Return Rate (%) Years to Maturity 1 $1,200 10.255 5 2 $1,000 6.7550 6 3 $1,175 12.110 7 Savings Account 5.500 Each unit of security 1, 2, and 3 guarantees to pay $1,000 at maturity. Investments in these securities must take place only at the beginning of year 1 and will be held until maturity. Any funds not invested in securities will be invested in a savings account that pays the annual interest rates noted above. The following table summarizes the cash needs for the expansion plan for each of the 8 years: Year 1 = $250,000 Year 5 = $295,000…
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