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41.
The value of the risky debt of a firm is equal to the value of:
42.
A firm has assets of $21.8 million and a 3-year, zero-coupon, risky bonds
with a total face value of $8.5 million. The bonds have a total current market
value of $8.1 million. How can the shareholders of this firm change these
risky bonds into risk-free bonds?
43.
Pure financial mergers:
44.
A purely financial merger:
45.
Which one of the following statements is correct?
46.
This morning, Krystal purchased shares of Global Markets stock at a cost of
$39.40 per share. She simultaneously purchased puts on Global Markets
stock at a cost of $1.50 per share and a strike price of $40 per share. The
put expires in one year. How much profit will she earn per share on these
transactions if the stock is worth $38 a share one year from now?
47.
Today, you purchased 100 shares of Lazy Z stock at a market price of $47
per share. You also bought a one year, $45 put option on Lazy Z stock at a
cost of $0.15 per share. What is the maximum total amount you can lose on
these purchases?
48.
Today, you are buying a one-year call on Piper Sons stock with a strike
price of $27.50 per share and a one-year risk-free asset which pays 4
percent interest. The cost of the call is $1.40 per share and the amount
invested in the risk-free asset is $26.57. How much total profit will you earn
on these purchases if the stock has a market price of $29 one year from
now?
49.
Today, you are buying a one-year call on one share of Webster United stock
with a strike price of $40 per share and a one-year risk-free asset that pays
4 percent interest. The cost of the call is $1.85 per share and the amount
invested in the risk-free asset is $38.46. What is the most you can lose on
these purchases over the next year?
50.
A.K. Scott's stock is selling for $37 a share. A 3-month call on this stock
with a strike price of $35 is priced at $3.40. Risk-free assets are currently
returning 0.18 percent per month. What is the price of a 3-month put on this
stock with a strike price of $35?
51.
Cell Tower stock has a current market price of $62 a share. The one-year
call on Cell Tower stock with a strike price of $65 is priced at $7.16 while
the one-year put with a strike price of $65 is priced at $7.69. What is the
risk-free rate of return?
52.
Grocery Express stock is selling for $22 a share. A 3-month, $20 call on this
stock is priced at $2.85. Risk-free assets are currently returning 0.2 percent
per month. What is the price of a 3-month put on Grocery Express stock
with a strike price of $20?
53.
J&N, Inc. stock has a current market price of $46 a share. The one-year call
on this stock with a strike price of $55 is priced at $0.05 while the one-year
put with a strike price of $55 is priced at $8.24. What is the risk-free rate of
return?
54.
You invest $4,500 today at 6.5 percent, compounded continuously. How
much will this investment be worth 8 years from now?
55.
Todd invested $8,500 in an account today at 7.5 percent compounded
continuously. How much will he have in his account if he leaves his money
invested for 5 years?
56.
Wesleyville Markets stock is selling for $36 a share. The 9-month $40 call
on this stock is selling for $2.23 while the 9-month $40 put is priced at
$5.63. What is the continuously compounded risk-free rate of return?
57.
The stock of Edwards Homes, Inc. has a current market value of $23 a
share. The 3-month call with a strike price of $20 is selling for $3.80 while
the 3-month put with a strike price of $20 is priced at $0.54. What is the
continuously compounded risk-free rate of return?
58.
What is the value of d2 given the following information on a stock?
59.
Given the following information, what is the value of d2 as it is used in the
Black-Scholes option pricing model?
60.
What is the value of a 3-month call option with a strike price of $25 given
the Black-Scholes option pricing model and the following information?
