The saying "buy low, sell high" suggests that investors should make a:
A firm is considering a business project which costs $10m now and is expected to pay a single cash flow of $12.1m in two years.
Assume that the initial $10m cost is funded using the firm's existing cash so no new equity or debt will be raised. The cost of capital is 10% pa.
Which of the following statements about net present value (NPV), internal rate of return (IRR) and payback period is NOT correct?
Question 625 dividend re-investment plan, capital raising
Which of the following statements about dividend re-investment plans (DRP's) is NOT correct?
A trader buys one crude oil European style call option contract on the CME expiring in one year with an exercise price of $44 per barrel for a price of $6.64. The crude oil spot price is $40.33. If the trader doesn’t close out her contract before maturity, then at maturity she will have the:
Which of the below formulas gives the profit ##(\pi)## from being long a call option? Let the underlying asset price at maturity be ##S_T##, the exercise price be ##X_T## and the option price be ##f_{LC,0}##. Note that ##S_T##, ##X_T## and ##f_{LC,0}## are all positive numbers.
Question 793 option, hedging, delta hedging, gamma hedging, gamma, Black-Scholes-Merton option pricing
A bank buys 1000 European put options on a $10 non-dividend paying stock at a strike of $12. The bank wishes to hedge this exposure. The bank can trade the underlying stocks and European call options with a strike price of 7 on the same stock with the same maturity. Details of the call and put options are given in the table below. Each call and put option is on a single stock.
European Options on a Non-dividend Paying Stock | |||
Description | Symbol | Put Values | Call Values |
Spot price ($) | ##S_0## | 10 | 10 |
Strike price ($) | ##K_T## | 12 | 7 |
Risk free cont. comp. rate (pa) | ##r## | 0.05 | 0.05 |
Standard deviation of the stock's cont. comp. returns (pa) | ##\sigma## | 0.4 | 0.4 |
Option maturity (years) | ##T## | 1 | 1 |
Option price ($) | ##p_0## or ##c_0## | 2.495350486 | 3.601466138 |
##N[d_1]## | ##\partial c/\partial S## | 0.888138405 | |
##N[d_2]## | ##N[d_2]## | 0.792946442 | |
##-N[-d_1]## | ##\partial p/\partial S## | -0.552034778 | |
##N[-d_2]## | ##N[-d_2]## | 0.207053558 | |
Gamma | ##\Gamma = \partial^2 c/\partial S^2## or ##\partial^2 p/\partial S^2## | 0.098885989 | 0.047577422 |
Theta | ##\Theta = \partial c/\partial T## or ##\partial p/\partial T## | 0.348152078 | 0.672379961 |
Which of the following statements is NOT correct?
The Australian central bank implements monetary policy by directly controlling which interest rate?
What is the Cash Conversion Cycle for a firm with a:
- Payables period of 1 day;
- Inventory period of 50 days; and
- Receivables period of 30 days?
All answer options are in days:
Question 880 gold standard, no explanation
Under the Gold Standard (1876 to 1913), currencies were priced relative to: