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Words 4462

Pages 18

Properties of Stock Options

Practice Questions

Problem 10.1.

List the six factors affecting stock option prices.

The six factors affecting stock option prices are the stock price, strike price, risk-free interest rate, volatility, time to maturity, and dividends.

Problem 10.2.

What is a lower bound for the price of a four-month call option on a non-dividend-paying stock when the stock price is $28, the strike price is $25, and the risk-free interest rate is 8% per annum?

The lower bound is [pic]

Problem 10.3.

What is a lower bound for the price of a one-month European put option on a non-dividend-paying stock when the stock price is $12, the strike price is $15, and the risk-free interest rate is 6% per annum?

The lower bound is [pic]

Problem 10.4.

Give two reasons that the early exercise of an American call option on a non-dividend-paying stock is not optimal. The first reason should involve the time value of money. The second reason should apply even if interest rates are zero.

Delaying exercise delays the payment of the strike price. This means that the option holder is able to earn interest on the strike price for a longer period of time. Delaying exercise also provides insurance against the stock price falling below the strike price by the expiration date. Assume that the option holder has an amount of cash [pic] and that interest rates are zero. When the option is exercised early it is worth [pic] at expiration. Delaying exercise means that it will be worth [pic] at expiration.

Problem 10.5.

“The early exercise of an American put is a trade-off between the time value of money and the insurance value of a put." Explain this statement.

An American put when held in conjunction with the underlying stock provides insurance. It guarantees that the stock can be sold for the strike price, K. If the put is exercised…...

...WACC AND DCL CALCULATION OF ASHOK LEYLAND Part 1: WACC CALCULATION WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. It is the minimum acceptable return that a company must earn on an existing asset base to satisfy its stakeholders. Calculation of WACC as on 31st March 2012 Total Debt of the company = Rs 2395.53 Cr Interest = 255.25 Cr Rs. The cost of Debt before tax = Interest/Tax *100 = 10.65 Now, Tax% = Tax/PBT = 124/689.97 = 0.1797 Hence, Cost of debt after tax = (Cost of debt before tax*(1-Tax %)) = (10.65*(1-.1797)) = 8.74 ……… (1) Now, the cost of Equity at Market price according to CAPM model is given as IRF + (RM-IRF)*Beta……. (2) Where IRF is risk free return, in this case it is 8% ……. (3) RM is the market return, i.e. change in the market indices over one year given as ((30.30-28.45)/28.45)*100 = 6.50 % ….. (4) Share price as on 31st march 2012 = 30.30 Share price as on 31st march 2011 = 28.45 The beta value for Ashok Leyland is given as 1.1 in the CRISIL official website Now putting the value of Beta along with equations (3) & (4) in (2), we get, Cost of equity = 8 + (6.50-8)*1.1 = 6.35% …. (5) Let us assume that the cost of reserves and surplus is equivalent to the cost of equity i.e. 6.35% … (6) Now assigning weights, The total equity in the market for Ashok Leyland is 2660700000 * market price as on March 31st 2012 30.30 = 8061.921 Cr Rs. The total debt = 2395.53 Cr Rs. Total reserve = 2632.34 Cr...

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...Business Terms and Calculations Simple interest and compound interest are the two most common forms of interest, and are utilized most often with banks and lending companies (Hamel, G. 2009). Simple interest is interest that is only applied to a principle value that is owed. If you received a $1,000 loan with an annual simple interest rate of 10%, then you would owe $100 each year on that principle if no payments were made. Compound interest is interest that is not only applied to the principle value owed but also on the interest that has accrued throughout the life of that principle amount. If you received a $1,000 loan with an annual compound interest rate of 10%, then if you failed to make any payments you would owe 1,100 after the first year, 10% on $1,100 after the second year, 10% on $1,210 after the third year, and so forth. The formula that can be used to calculate interest is I = Prt (Interest = Principle*rate*time). Present value and future value are terms that deal with the time value of money (Carther, S., 2009). Present value is the current worth of a future value of money or assets given a particular rate of return. Future value is the value of money or assets at a particular time in the future that is equal to a particular sum today. Say you are given a $100, its present value is $100, but if you invested it into a Certificate of Deposit (CD) for 5 years with a simple interest rate of 10% that $100 has a future value of $150. Typically, an annuity is......

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...for LED’s (with different types of LED’s circuits) This tutorial will help you to find the proper value of resistor (or resistors) for one or more LED’s to connect with battery. If you pick this topic, you will be able to: Calculate the value of resistors for different LED’s Circuit diagrams Calculate the Forward Current of LED’s Calculate the Forward Voltage for different LED’s Circuits Connect LED’s in Series with batter Connect LED’s in Parallel with battery Connect LED’s in Series-Parallel Circuits Typical LED Symbol, Construction and Lead Identification. Click Image to enlarge Before we go in detail, we will try to get ride on below simple circuit, so that the other calculation will be easier to understand. Click Image to enlarge This is the Simplest LED Series circuit ever. Here, the supply voltage is V, LED Forward Voltage (VF) is 1.3 Volt and Forward Current (IF) is 10mA. Now the Value of resistor (which we will connect in Series with LED) for this circuit would be: Resistor Value = (Vsupply - VF)/ IF = (6 -1.3) / 10mA = 470 Ω Current draw = 20mA Resistor Power rating formula for this circuit Resistor Power Rating = IF2 x Resistor Value = (10mA) 2 x 470 Ω = 0.047W = 47mW But This is the minimum required resistor value to ensure that resistor will not overheat, so its recommended that to double the power rating of resistor that you have......

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...market cap to total net profit is the Sensex PE!Let us now calculate the PE of the Sensex as on March 30, 2007, that is, the last day of the financial year 2007.Since we are calculating the PE for the period gone by it will be called as historical PE. PE calculated for next financial year or any time after that is called as forward PE.PE for the SensexThe shares outstanding for each of the 30 stocks were taken from the BSE website.Since, there is hardly any point in using historical data for EPS, we took the FY07 estimates* from one of the brokerage houses' projections. As this is the simplest way of calculating PE (there are many ways of calculating this ratio), the actual Sensex PE that a reader calculates, may vary from the one we are calculating now.The point here is not the exactness of the number, but the process in which it is done. The example is attempted to explain the concept mentioned above.Total market capitalisation = Sum Of individual market capitalisation = Rs 16,25,367 croreTotal net profit (FY07 estimate*) = Sum of individual net profits = Rs 1,17,982 croreHence Sensex PE = (16,25,367 / 1,17,982) = 13.78 times* Actual net profit figures for financial year 2006-07 are yet to be declared, hence estimates are taken.While this method gives you the Sensex PE, analysts first calculate the......

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...PROPERTIES OF MILD STEEL 4.1.1 PHYSICAL PROPERTY * Density-7860/m3 * Melting point -1427 * Thermal conductivity – 63 4.1.2 CARBON CONTENT Low carbon (or) Mild steel – 0.15 to 0.45carbon 4.1.3 MECHANICAL PROPERTY * Elasticity * Ductility * Toughness * Weld ability In our design, screwed spindle have a main part hence the calculation are concentrated on it. 4.2 HYDRAULIC OIL SERVO68 Hydraulic oil ISO 32 | Mineral based hydraulic oil | Property | Value in metric unit | Value in US unit | Density at 60°F (15.6°C) | 0.868 *10³ | kg/m³ | 54.2 | lb/ft³ | Kinematic viscosity at 104°F (40°C) | 32.2 | CSt | 32.2 | cSt | Kinematic viscosity at 212°F (100°C) | 5.52 | CSt | 5.52 | cSt | Viscosity index | 108 | | 108 | | Flash point | 212 | ºC | 414 | ºF | Pour Point | -33 | ºC | -27 | ºF | Table no:1 4.3 SPECIFICATION * Reservoir : 100 mm length and 80mm diameter * Cylinder : 100 mm length and 60mm diameter * Ram : 170mm length and 40mm diameter * Piston : 42mm diameter * Pump : 14mm diameter 4.4 DESIGN CALCULATION 4.4.1 PRESSURE INTENSITY Diameter of the piston D = 42mm Area of the piston A = (π/4) * D2 = (π/4) * 422 = 1385.4 mm2 Force = 50000 KN (designed) Maximum pressure P = F/A = 50000/1385.4 = 36.09 N/mm2 4.4.2 CYLINDER DESIGN Hoop stress c =P*D/2t c – hoop stress P – Pressure intensify......

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...| |Case A |Case B |Case C |Case D | |US |UK |US |UK |US |UK |US |UK | |Wheat (bushels/man-hour) |4 |1 |4 |1 |4 |1 |4 |2 | |Cloth (yards/man-hour |1 |2 |3 |2 |2 |2 |2 |1 | | 1. For each of the above, indicate which country has comparative advantage, if any, in which commodity, and indicate if trade is possible or beneficial. Case A: US has absolute and comparative advantage in wheat, UK in cloth. Opportunity cost of wheat in US is 1/4=0.25 cloth, in UK is 2/1=2 cloth. Similarly opportunity cost of cloth in US is 4/1=4 wheat, in UK is ½=0.5 cloth. Yes trade is beneficial. Case B: US has comparative advantage in wheat, UK in cloth, yes trade is beneficial. Case C: US has comparative in wheat, UK in cloth. Opp. Cost of wheat in US =2/4=0.5, in UK is 2/1=2. Opp Cost of cloth in US is 4/2=2, in UK is ½=0.5. Case D: There is no comparative advantage in either commodity. 2. Consider case B above; now answer the following: a. What is the cost “in terms of labor content or man-hours) of producing wheat and cloth in the U.S. and U.K.? In U.S. 4 bushels wheat are produced per hour, therefore each bushel costs 1/4=0.25 man-hours. Similarly, cost of cloth =1/3rd man-hour. In U.K. cost of wheat per bushel is 1 man-hour, cost of cloth per yard is 0.5 man-hour. b. What is the dollar price of wheat and......

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...Mortgage Calculations Alisha Logue MAN 222 Instructor Alan Jones Sept. 26, 2013 Calculating a mortgage loan can be difficult. With the help of www.mortgage.com, they offer an online calculator to assist you. By using this tool you are able to plug in all the needed figures and find out the totals of taxes, interest, etc. One feature it also allows you to do is see totals with or without extra payments. (citigroup.com)Extra payments towards your loan's principal can substantially decrease the amount of interest you pay over the life of your loan. By paying extra amounts each month, you will be able to repay your loan much more quickly(2013). For a $225,000 home, the mortgage loan is $21,375. A term of 15 years with a 5% interest rate with no extra payments is going to be higher than having extra payments. With no extra payments added, it will take the whole term of 15 years to pay off the loan. Adding a $100 extra payment will take only eight years and two months. You save about $4364 in interest paid by adding an extra payment each month. Adding an extra payment a month, the taxes and insurance and the mortgage insurance would be the same if you did not have an extra payment. Taxes and insurance would run about $123 and the mortgage insurance $0. Between having an extra payment and not having one, the principal and interest is $100 difference. The principal and interest total is then $169 with no extra payment, $269 with an extra payment. Total......

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...£ 60 000 (ii) at the higher potential level indicated by the market research, subject to a cut in price of 20%; L Ltd: £ 32 000, M Ltd: £ 92 000 b) to explain why the use of a market price as the transfer price produces difficulties under the conditions outlined in (a) (ii) above; b) (i) L Ltd is not motivated to reduce selling price, even though the whole firm would be better off, since M Ltd’s profits increase and M Ltd has the needed capacity. (ii) L Ltd needs to have incentive for the change. - Can transfer pricing method be changed to provide the incentives? - Are there savings in selling and distribution to decrease the TP? - Would negotiation be effective? - How important is divisional autonomy? c) to recommend, with supporting calculations, what transfer prices you would propose. M Ltd has the capacity needed, so transfer price need to be > variable costs Assuming that we only change the price of the extra 8000 units: L Ltd’s profits increase if its variable costs are reduced more than £1. This is because selling 8000 units more reduced L ltd’s profits by £8000. M Ltd should be able to cover its variable costs to increase its profits. VC= £200/1000l = £0.2/l. One drum needs 25 l -> variable costs £5 per drum. £5 < TP < £8 where TP is the transfer price for the extra units. ...

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...$0 $418 $2,430 $972.10 $1,458.14 $440 -$7,848 $225 $3,539 $1,415.68 $2,123.52 $440 $2,564 $3,539 $1,415.68 $2,123.52 $440 $7,009 $1,390 $556.16 $834.24 $440 $2,843 $632 $252.80 $379.20 $440 $2,127 The Net Working Capital comes out to be $5,648 as for production to begin in 2010, the Net Working Capital comes in the year 2010. 3) Here, we need to calculate the unleveraged Beta for the three different companies, Micron Technologies, SanDisk Corporation and STEC Inc and then take the average of the three Beta Values to get the unleveraged Beta and then calculate the leveraged Beta using the formula as seen below to calculate the Industry Beta for the year 2010. Beta(Leveraged) = Beta(Unleveraged) * (1+ (1-T) * D/E) Calculation for Beta 1) For Micron Technologies Beta(Leveraged) = Beta(Unleveraged) * (1+ (1-T) * D/E) B(Leveraged) = 1.25 Tax Rate = 40 % Debt = 33 % Equity = 67 % 1.25 = B(Unleveraged) * (1+(1-0.4)*33/67) So, B(Unleveraged) = 0.964 2) For SanDisk Corporation B(Leveraged) = 1.36 Tax Rate = 40 % Debt = 19 % Equity = 81 % 1.36 = B(Unleveraged) * (1+(1-0.4)*19/81) So, B(Unleveraged) = 1.1795 3) For STEC Inc B(Leveraged) = 1 Tax Rate = 40 % Debt = 0 % Equity = 100 % 1 = B(Unleveraged) * (1+0.6*0/100) So, B(Unleveraged) = 1 Thus, the average of the above three Betas will give us the unleveraged Industry Beta B(Average)(Unleveraged) = (0.964+1.1795+1)/3 = 1.05 The Leveraged Beta for the market can be calculated using the formula as mentioned above......

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...PART 3: DOSAGE CALCULATIONS Please solve the dosage calculation, showing your work. Each question is worth 2 points for a total of 12 points for this section. “Ordered” refers to what strength/dosage the physician requested. “On hand” refers to what is available. 1. Ordered: 5 mg po tid On hand: 2 mg scored tablets • How many tablets do you need for each dose? • How many tablets do you need for a sixty day supply? 2. Ordered: 200 mg po q8h On hand: 110mg/5 mL • How many mL’s do you need for each dose? • How many mL’s do you need for a one-day supply? 3. Ordered: 2.5 g On hand: 50 mg/mL • How many mL’s do you need to give the ordered amount? 4. Ordered: 240cc (a cc is the same as a mL) On hand: oz • How many ounces do you need to give the ordered amount? PART 3: DOSAGE CALCULATIONS (CONTINUED) Please solve the dosage calculation, showing your work. Each questions is worth 2 points for a total of 8 points for this section. Amoxil 125 mg/ 2 mL comes in a 50 mL bottle (when reconstituted) 1. If the patient is to receive 250 mg, what will the dose be in mL? 2. How many teaspoon(s) is (are) equivalent to 250 mg? 3. If a patient is taking 250 mg of Amoxil every 6 hours, how many days should the bottle of medicine last? 4. If a patient is taking 500 mg of Amoxil every 6 hours, how many doses are provided by the bottle?...

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...Deepak K S Roll No: 2014201 Section D FM Assignment 2 Stock: NATCO Pharma ------------------------------------------------- Exchange: NSE Beta calculation using direct method: Covariance | = | 0.00492 | Variance | = | 0.00517 | Beta | = | 0.951 | Table: Regression Summary Output Regression Statistics | | | | | | | | Multiple R | 0.516 | | | | | | | | R Square | 0.266 | | | | | | | | Adjusted R^2 | 0.260 | | | | | | | | Standard Error | 0.114 | | | | | | | | Observations | 120 | | | | | | | | | | | | | | | | | ANOVA | | | | | | | | | | df | SS | MS | F | Significance F | | | | Regression | 1 | 0.556 | 0.556 | 42.785 | 1.643E-09 | | | | Residual | 118 | 1.534 | 0.013 | | | | | | Total | 119 | 2.090 | | | | | | | | | | | | | | | | | Coefficients | Standard Error | t Stat | P-value | Lower 95% | Upper 95% | Lower 95.0% | Upper 95.0% | Intercept | 0.0137 | 0.011 | 1.292 | 0.199 | -0.007 | 0.035 | -0.007 | 0.035 | X Variable 1 | 0.951 | 0.145 | 6.541 | 0.000 | 0.663 | 1.238 | 0.663 | 1.238 | Figure: Beta computation using trendline plot method Table: WACC Computation using CAPM method ------------------------------------------------- Average market return, Rm = 14.750% ------------------------------------------------- Risk free rate, Rf = 8.07% ------------------------------------------------- Cost of equity, Ke ...

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...measures used to safeguard the project. Therefore, “risk increases with hazard and decreases with safeguard” (Kerzner, 2009) References Bowman, E. (1983). Content Analysis of Annual Reports for Corporate Strategy and Risk. Institute for Advanced Studies in Management, 1-10. Berg, H. (2010, june). Risk Management: Procedures, Methods and Experiences. 1-95. Kerzner, H. (2009). Project Management: A Systems Approach to Planning, Sceduling, and Controlling (10th. ed.). NewYork: John Wiley & Sons. Inc. Qualitygurus. (2013, May 31). Introduction to Risk Management. Retrieved from Youtube: http://www.youtube.com/watch?v=Cp_XEhexcDw Theodore, L., & Dupont, R. (2012). Environmental Health and Hazard Risk Assessment: Principles and Calculations. Florida: CRC Press....

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...The following carbon footprint calculation is based on my personal boundary that the amount consumed by myself. The amount consumed is calculated from February 2015 when I moved to the new apartment where I am living to February 2016 which is easier to calculate. Explanation of the calculation of carbon footprint The amount of emission of carbon dioxide can be calculated by the ISA-GHG calculator based on the dollar amount spent on individual activity. Generally, my weekly budget could be divided into three parts: rent, entertainment cost and food cost on supermarkets. Rent accounts for the largest proportion of it, followed by food on supermarkets and entertainment cost. Specifically, individual spending can be evidenced by the receipts and I having been recoding my weekly expense for a long time so they are all reliable sources for the carbon footprint calculation. Moreover, I am living in a shared house with my flatmates, the electricity bill, rent and water bill should be divided by the number of people living in the department to calculate an accurate number. The classification of GHG emission According to the classification of GHG emission, my daily activities can be divided into Scope 1, Scope 2 and Scope 3. Under the food section, I have the direct ownership of those food and vegetable so activities related to them are considered as Scope 1. Under the Housing section, my activity in the past year didn't get involved to natural gas and construction and......

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...CALCULATION EXERCICES To the LABORATORY EXPERIMENTS IN MEDICAL CHEMISTRY Edited by: Zoltán Matus Compiled by: Péter Jakus László Márk Anikó Takátsy Pécs, 2007 Table of content: Introduction 3 1. Stoichiometry I. Balancing equations 4 2. Stoichiometry II. Calculation exercises 9 3. The gaseous state 13 4. Concentrations of solutions 17 5. Calculations connected to titrimetry 28 6. Electrolytic dissociation 33 7. Dilute solutions 38 8. Hydrogen ion concentration, pH, buffers 44 9. Heterogeneous equilibria. Crystallisation, solubility product, partition coefficient 55 10. Thermochemistry 64 11. Electrochemistry 67 2 INTRODUCTION The chapter is devoted to helping the students practice the most important topics of General Chemistry. The order of the sections follows the schedule of the lectures and seminars, and their volume indicates the importance of the topic. Each section begins with a few solved problems. They represent the minimum requirement at the exam. The worked-out solutions are not the only ones. For an easier self-checking, the numerical results of the unsolved calculation exercises are given in parentheses after each question. Sources: 1.) Laboratory experiments in medical chemistry, ed. György Oszbach, Pécs, 1998. 2.) Villányi Attila: Ötösöm lesz kémiából, (6. ed.) Mőszaki Könyvkiadó, Budapest., 1999 3.) Charles E.......

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...Chapter 1 Return Calculations In this Chapter we cover asset return calculations with an emphasis on equity returns. Section 1.1 covers basic time value of money calculations. Section 1.2 covers asset return calculations, including both simple and continuously compounded returns. Section 1.3 illustrates asset return calculations using R. Updated: June 23, 2011 1.1 The Time Value of Money This section reviews basic time value of money calculations. The concepts of future value, present value and the compounding of interest are dened and discussed. 1.1.1 Future value, present value and simple interest. Consider an amount $ invested for years at a simple interest rate of per annum (where is expressed as a decimal). If compounding takes place only at the end of the year the future value after years is: = $ (1 + ) × · · · × (1 + ) = $ · (1 + ) (1.1) Over the rst year, $ grows to $ (1+ ) = $ +$ × which represents the initial principle $ plus the payment of simple interest $ × for the year. Over the second year, the new principle $ (1+ ) grows to $ (1+ )(1+ ) = $ (1 + )2 and so on. 1 2 CHAPTER 1 RETURN CALCULATIONS Example 1 Future value with simple interest. Consider putting $1000 in an interest checking account that pays a simple annual percentage rate of 3% The future value after = 1 5 and 10 years is, respectively, 1 5 10 = $1000 · (1 03)1 = $1030 = $1000 · (1 03)5 = $1159 27 = $1000 · (1 03)10 = $1343 92 Over the rst year, $30 in......

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