The price of a non-dividend paying stock is currently S = 100. Over the next year, it is expected to go up by 25% (u = 1.25) or down by 20% (d = 0.80). The risk-free interest rate is r = 5% per annum with continuous compounding. How many units (figures without decimals) of the stock should you include in a portfolio containing a European Put option that gives the right to sell 100 units of the stock at a strike price K = 100 each, for the result of this portfolio to be independent of the price of the stock, in 1-year time?
Answers
The number of units (figures without decimals) of the stock that should be included in a portfolio containing a European Put option that gives the right to sell 100 units of the stock at a strike price K = 100 each, for the result of this portfolio to be independent of the price of the stock, in 1-year time is 0.
Therefore, if we construct the replicating portfolio for this European Put option consisting of an amount σ of the non-dividend paying stock and an amount p of the bond, the portfolio must satisfy the following conditions:
\[\begin{array}{c}{{\sigma}S(1+r) + p(1+r) = P(100, 1)}\\{\sigma S u + p = (K - S d) e^{-r}}\end{array}\]Substituting S = 100, r = 5%, K = 100, d = 0.80, u = 1.25, and P(100, 1) = max{0, K - S} = max{0, 0} = 0, we obtain: \[\begin{array}{c}{{\sigma}(100)(1 + 5\%) + p(1 + 5\%) = 0}\\{\sigma(100)(1.25) + p = (100 - 100(0.80))e^{-5\%}}\end{array}\]
Simplifying the above equations, we get: \[\begin{array}{c}{1.05\sigma + 1.05p = 0}\\{1.25\sigma + p = 96.53}\end{array}\]
Solving for σ and p using simultaneous equations: \[1.05\sigma + 1.05p = 0\Rightarrow \sigma + p = 0\]\[1.25\sigma + p = 96.53\]
Substituting σ = -p, we obtain: \[1.25(-p) + p = 96.53\Rightarrow -0.25p = -3.47\].
Hence, p = 13.88 and σ = -p = -13.88.
Since the stock price is currently S = 100, the number of units (figures without decimals) of the stock that should be included in the replicating portfolio is given by:
\[\sigma = -13.88\Rightarrow \text{Number of units of stock} = -\frac{\sigma}{S} = \frac{13.88}{100} \approx. 0\]
Therefore, the number of units (figures without decimals) of the stock that should be included in a portfolio containing a European Put option that gives the right to sell 100 units of the stock at a strike price K = 100 each, for the result of this portfolio to be independent of the price of the stock, in 1-year time is 0.
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Related Questions
What are the 3 things a business plan should do?.
Answers
Three things a business plan should do are to outline the products that the firm will sell, market analysis, and financial planning.
A business plan outlines the goals and strategies of a company. It is a road map that contains the marketing, financial strategies, and other operational details of established companies or start-ups. A well-written business plan must include what products and services the company will produce and sell. It will decide the cost of production, pricing, lifespan, and benefits of the products or services.
A business plan will also have a market analysis to assess the competition in the market and assess its advantages and disadvantages in the market. It will help in building the strengths of the company and improve the weakness too. Financial planning is another important criterion mentioned in a business plan where the budget decisions and monetary policies are decided to maintain cash flow in the company.
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Imagine that you need to contact a coworker to get a copy of the notes taken in a meeting with a new client last week, which you could not attend. Create an appropriate email for this request. Since it is a co-worker, you can assume that you are on a first-name basis.
Answers
Answer:
Subject: Request for Notes from Meeting with New Client
Hi [Coworker’s Name],
I hope this email finds you well. I wanted to follow up with you regarding the meeting with the new client last week. Unfortunately, I wasn't able to attend, but I would like to review the notes to get caught up on what happened.
Would it be possible for you to send me a copy of the notes from the meeting? I would really appreciate it. I'm especially interested in any key takeaways and next steps.
Please let me know if this is feasible and if you need any assistance in preparing the notes. Thank you in advance for your help.
Best regards,
[Your Name]
in a competitive market, strategic interactions among the firms are not important.
True
Answers
The statement "in a competitive market, strategic interactions among the firms are not important" is false. This is because in a competitive market, firms have to use strategic interactions to gain a competitive advantage over other firms.
The statement "in a competitive market, strategic interactions among the firms are not important" is false. This is because competition exists in a market where there are a large number of sellers who offer similar products to a large number of buyers. In such a market, firms have to use strategic interactions to gain a competitive advantage over other firms. This means that they have to take into account the actions of their competitors when making decisions.
In a competitive market, firms have to use strategic interactions to gain a competitive advantage over other firms. This means that they have to take into account the actions of their competitors when making decisions. For example, if one firm decides to lower its prices, then other firms may also decide to lower their prices to remain competitive. This can lead to a price war, where firms keep lowering their prices to gain an advantage over each other.In such a market, strategic interactions are important because they help firms to differentiate their products from those of their competitors. For example, if one firm decides to offer better quality products, then other firms may also decide to improve the quality of their products to remain competitive. This can lead to product differentiation, where firms offer products that are different from those of their competitors.
In conclusion, the statement "in a competitive market, strategic interactions among the firms are not important" is false. This is because competition exists in a market where there are a large number of sellers who offer similar products to a large number of buyers. In such a market, firms have to use strategic interactions to gain a competitive advantage over other firms.
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Define business in your own words. What do you believe a business is?
Answers
Answer: a person's occupation, or a company
Explanation:
Both engines took exactly minutes to seize. what conclusion might the magazine make based on this evidence?
Answers
Based on the evidence that both engines took exactly the same amount of time to seize, the magazine might conclude that there is a common factor or issue affecting both engines simultaneously.
When both engines experience the same issue at the same time, it suggests that there could be a shared cause affecting their performance. This evidence can lead the magazine to investigate potential factors that could impact engine functioning, such as a fuel problem, maintenance issue, or external environmental conditions.
To further analyze the situation, the magazine might consider factors that could affect both engines equally. For example, if both engines were exposed to extreme weather conditions, it could lead to a conclusion that weather played a role in their seizure. Alternatively, if the engines were fueled from the same source, a contaminated fuel supply could be a potential cause.
By considering the evidence and possible factors, the magazine can draw conclusions about the common cause behind both engines seizing. This analysis can guide them in taking appropriate measures to prevent future occurrences and ensure the engines operate efficiently.
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One of the limitations of mainstream economics is that it does not take into account _____ costs when a price is assigned to product or service.
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bbbbbbbbb
ggghggggggggg
how existing businesses changed the way they operate to keep afloat during the lockdown periods.
Answers
Answer:
Combine speed and stabilityTurn digitization into an advantageDrive systemic change through cooperationExplanation:
Office companies moving to at home working
Shops creating online shops
How does a command economy answer the three economic questions?
(1) what to produce, (2) how to produce, and (3) for whom to produce.
Answers
Answer:
key terms in purest from a market economy answers the three economic questions by allocating resources and goods through markets where prices are generated. In its purest form, a command economy answers the three economic questions by making allocation decisions centrally by the government.
Answer:
is it (3) for whom to produce.
Explanation:
How important is money
Answers
Answer:
very important
Explanation:
money is a global income source for everyone. we all have different types but it is all still money. now say one country got rid of money and had people pay for stuff using other things. if china did that lots of different countries wouldn't be able to get stuff from there unless they had so much of that product they could just give it up.
Sally spends $1,500 each month on her mortgage, mortgage insurance and property taxes. she has three credit cards with minimum monthly payments that total to $125.00 and a monthly car payment for $349.00. she currently brings in a gross monthly income of 3,750.00 from her job. calculate sally’s debt-to-income (dti) ratio. a. 40% b. 43% c. 49% d. 53% please select the best answer from the choices provided a b c d
Answers
If Sally spends $1,500 each month on her mortgage, mortgage insurance and property taxes. sally’s debt-to-income (dti) ratio is d. 53%.
How to find the debt-to-income (dti) ratio?To calculate Sally's debt-to-income (DTI) ratio, we need to first determine her total monthly debt payments and then divide that amount by her gross monthly income.
Sally's total monthly debt payments are:
Mortgage + Mortgage insurance + Property taxes = $1,500
Credit card minimum payments = $125
Car payment = $349
Total monthly debt payments = $1,500 + $125 + $349 = $1,974
To calculate Sally's DTI ratio, we now divide her total monthly debt payments by her gross monthly income:
DTI = (Total monthly debt payments / Gross monthly income) x 100%
DTI = ($1,974 / $3,750) x 100%
DTI = 52.64%
DTI = 53 % (Approximately)
Therefore, Sally's debt-to-income ratio is 53%.
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Question 6 of 10
The optional feature in a business letter is the:
A. date.
B. inside address.
C. closing.
D. reference.
Answers
Answer:
D would be the correct answer
Explanation:
Answer: reference
Explanation: ape x
X
✓
The primary function of the Gini coefficient is to
(4 points)
measure the quality of human capital in an economy
O explain the cause of income inequality
O measure income inequality in an economy
show the efficiency of an economy
show the amount of wealth in an economy
Points
Answers
Answer:
The primary function of the Gini coefficient is to measure income inequality in an economy. It is a statistical measure that is used to represent the distribution of income or wealth among a population. A Gini coefficient of 0 indicates perfect equality, where everyone in the population has the same income or wealth. A Gini coefficient of 1 indicates perfect inequality, where one person has all the income or wealth in the population. The Gini coefficient is often used to assess the level of income inequality in a country or region and can be used to inform policy decisions related to redistributive measures such as taxes and welfare
FILL IN THE BLANK. A ________ shows the capacity required at each work center based on planned and released orders for each time period of the plan.
Answers
A capacity plan shows the capacity required at each work center based on planned and released orders for each time period of the plan.
Capacity planning is a process of determining the amount of production capacity a company needs to meet its current and future demand. The capacity plan provides a detailed view of the required capacity at each work center or machine, based on the production schedule and order releases.
The capacity plan is an important tool for manufacturers, as it helps to ensure that they have enough production capacity to meet customer demand while minimizing waste and inefficiencies. By understanding the required capacity for each work center, manufacturers can plan their production schedules more effectively and make informed decisions about investment in new equipment or facilities.
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In ______ capital markets, the same future cash flows are likely to be priced ______ way across countries.
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In integrated capital markets, the same future cash flows are likely to be priced the same way across countries. To strengthen community resilience and enhance the lives of individuals who have been left out by the global economy, the social industries sector must be prospering. Social companies that exist to address social and environmental issues are prepared to take on complicated systemic issues.
Create new infrastructure, and create products and services that meet urgent needs, even if their profit potential is not immediately apparent or won't materialize for some time. The existing split of capital resources into overly specialized industries, such as venture investment and charity foundations.
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A dominated alternative
A) has a worse payoff for every state-of-nature than at least one other alternative
B) is discarded from the analysis and is not considered any further
C) is not included in the rankings of the rules
D) All of the above
Answers
A dominated alternative has a worse payoff for every state-of-nature, is discarded from analysis, and is not included in the rankings of the rules. The correct answer is D)
A dominated alternative is an option in decision-making that has a worse payoff for every state-of-nature compared to at least one other alternative. In other words, it is always inferior regardless of the outcome.
When analyzing decision alternatives, a dominated alternative is discarded from the analysis and not considered further. This is because there are always better alternatives available, making the dominated one irrelevant.
Furthermore, a dominated alternative is not included in the rankings of the rules. It is disregarded due to its inferiority.
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The trade off theory optimal capital structure is achieved when marginal tax savings equals the marginal increased bankruptcy costs from the additional unit of debt. True or False?
Answers
It is true that the trade-off theory optimal capital structure is achieved when marginal tax savings equals the marginally increased bankruptcy costs from the additional unit of debt.
What is trade-off theory?
The trade-off theory of optimal capital structure suggests that there is an optimal level of debt for a company, where the marginal tax savings from the additional debt equals the marginally increased bankruptcy costs. This means that companies must balance the benefits of using debt, such as tax deductions, with the costs, such as the risk of bankruptcy. Ultimately, the optimal capital structure is the one that maximizes the company's value.
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Explain the tool of monetary policy a government could use to gain positive balance of payment
Answers
Answer:
What is the tool of monetary policy?
Central banks have four main monetary policy tools: the reserve requirement, open market operations, the discount rate, and interest on reserves. 1 Most central banks also have a lot more tools at their disposal. Here are the four primary tools and how they work together to sustain healthy economic growth.
Explanation:
What role, if any, should hattie's past record play in this case? explain your answer. 2. Does management have a right to know why employees refuse to work overtime? why or why not? 3. Evaluate the arguments of hattie mae and management in this case. 4. If you were a member of the company's peer-review complaint committee, how would you vote in this case? what facts would cause you to vote this way?
Answers
The arguments of hattie mae and management in this fraud detection case. What would you say to the committee regarding the significance of managers and staff receiving fraud detection training so as to reduce the losses.
Fraud detection is a collection of procedures used to protect money and property from fraudulent claims.It can be used in a variety of industries, including banking and insurance.
Employees are a valuable resource that can aid in the suppression of fraud were a member of the company's peer-review complaint committee, When they are properly trained in fraud detection, the scam will be stopped fairly early on. This can prevent losses for the business and cut down the time and expense needed for auditing and fraud detection.
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The reason business exists is to make a
profit..........Is this true? Is there any other reason?
Are profits really necessary? Can there be other motives? Or other
focuses?
Answers
It is true that the reason business exists is to make a profit, as it is a crucial indicator of a company's financial health. Nevertheless, there are other motives that can prompt individuals to engage in business activities.
Let's take a closer look at the statement to get a clear understanding of the reasons behind it: Yes, it is true that businesses exist to make a profit. Profit is essential to maintain a company's operations and promote growth. This is due to the fact that it aids in the development of new products, the hiring of additional employees, and the improvement of existing processes.
There can, however, be other motives and focuses for starting a business. For example, some individuals may be motivated by a desire to assist the community or solve a societal issue. They may also want to work on a project that excites them and that they believe will benefit society in the long run.
Therefore, we can say that while profits are necessary for the financial success of a company, they are not the only reason for engaging in business activities.
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A hypothesis serves as: A way of eliminating extraneous variables from the research design A way of developing an IRB application A way of assessing the study results A proposed mechanism by which key factors relevant to a research question interact with one another
Answers
Option (d), A hypothesis describes a potential method through which important variables pertinent to a study question interact.
How should we interpret the research method hypothesis?A hypothesis is a specific, testable prediction of what the researcher(s) anticipate the findings of the study to be (plural: hypothese). It is acknowledged at the opening of the inquiry.
Why does the hypothesis exist?As was said before, a hypothesis drives the collection and interpretation of data and provides a solution to the research question. Along with finding links between variables, hypotheses can also be used by researchers to anticipate associations between variables using theoretical concepts and/or real data.
What kinds of theories are there?The null hypothesis and the alternative hypothesis are the two frameworks that are typically used in research when presenting your hypothesis (referred to as the experimental hypothesis when an experiment is the investigational procedure.).
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Select the correct answer.
Oliver is busy planning the launch of his new company. He hired a business professional to act as the interim CEO and asked for a report on the
possible controllable risks the company could face. Which risk would be deemed as controllable?
Answers
Oliver is busy planning the launch of his new company. He hired a business professional to act as the interim CEO and asked for a report on the possible controllable risks the company. The firm’s IT architecture risk would be deemed as controllable.
What is a business?
A business can be referred to as an organization or enterprising entity that engages in professional, commercial or industrial activities. There are different types of businesses like sole proprietorships, partnerships, corporations, and more.
The businesses are basically work for profit motive. Businesses can be small-scale or large-scale. Some of the biggest businesses in the world are Amazon and Walmart.
There are different types of partners in a business. The persons who owns the shares of the company is known as shareholder. The partner who can lose only what he or she has invested in a business is the general manager.
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Answer:
i think A edmentum
Which statement is true about employer payroll taxes?
OA. Employers are required to pay them, but employees are not
required to.
B. Both employees and employers are required to pay them equally.
C. They are used to fund programs that directly benefit employees.
D. They are used to fund programs that directly benefit employers.
Answers
The correct answer is B. Both workers and employers are needed to pay employer payroll levies inversely.
Employer payroll levies are levies that employers are needed to pay on behalf of their workers. These levies include Social Security and Medicare levies, civil and state severance levies, and other state and original levies.
Employers are needed to withhold these levies from their workers' hires and pay them to the government. Both employers and workers contribute to Social Security and Medicare levies, which are used to fund programs that directly profit workers.
Social Security provides withdrawal, disability, and survivor benefits, while Medicare provides healthcare benefits for people over the age of 65 and for those with certain disabilities.
Federal and state severance levies, on the other hand, are used to fund programs that give temporary fiscal backing to workers who have lost their jobs through no fault of their own. These programs are designed to help workers get back on their bases while they search for new employment.
In summary, employer payroll levies are paid by both employers and workers, and they're used to fund programs that directly profit workers, similar as Social Security and Medicare, and programs that laterally profit workers, similar as severance insurance.
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PLEASE HELP ASAP
_____ Is having the ability to roll with the punches
A. Communication
B. Leadership
C. Conflict resolution
D. Resilience
Answers
Answer:
I'm guessing the answer would be D
I don't actually know though and if it's wrong I'm sorry
What are capital gains on an investment?
Answers
Capital gains are profits on an investment. whilst you sell investments at a higher price than what you paid for them, the capital gains are "found out" and you will owe taxes on the amount of profit.
Capital gain and different investment earnings range based on the source of the profit. Capital gains are the returns earned while an investment is bought for more than its purchase price. Funding earnings is take advantage of interest payments, dividends, capital profits, and another earnings made through an funding vehicle.Capital profits taxes follow only to “capital assets,” which include stocks, bonds, rings, coin collections, and actual estate. long-term gains are levied on profits of investments held for extra than a yr. quick-term gains are taxed on the person's regular income tax fee.
Subtract your foundation (what you paid) from the found out quantity (how an awful lot you offered it for) to determine the difference. if you sold your assets for more than you paid, you have a capital benefit. if you bought your assets for less than you paid, you have a capital loss.
Examples include a domestic, personal-use items like family furnishings, and stocks or bonds held as investments. when you promote a capital asset, the difference between the adjusted basis in the asset and the amount you realized from the sale is a capital gain or a capital loss.
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who was the 20th president
Answers
Answer:
Of what country? Philippines or US or what??
Answer:
Kuroo Here!
Explanation:
It was James A. Garfield
Hope This Helps!! (^ '--')
Pompeii, Inc., has sales of $53,000, costs of $24,200, depreciation expense of $2,550, and interest expense of $2,300. If the tax rate is 24 percent, what is the operating cash flow, or OCF
Answers
Answer:
$23,052
Explanation:
The computation of operating cash flow is shown below:-
Before that we have to determine the net income which is
Income statement
Sales $53,000
Cost ($24,200)
Depreciation ($2,550)
EBIT $26,250
Interest expense ($2,300)
Earnings before tax $23,950
Tax (5,748)
(24% × $23,950)
Net income $18,202
Now,
Operating cash flow = EBIT + Depreciation - Tax
= $26,250 + 2,550 - $5,748
= $23,052
if you are married with young children and make $75,000 per year, how much term life insurance should you have?
Answers
Answer:
you'd buy $1,275,000 in life insurance. With this amount of coverage, your beneficiary should be able to replace your income with interest and dividends earned from investing the life insurance proceeds make sure it covers 10 or 12 x more then whats already covered
Explanation:
An
LPN has been working in oong term care for 20 years? what 5 things
would you ask her about her job?
Answers
1. Can you describe your role and responsibilities as an LPN in long-term care?
2. What are some of the most significant changes or developments you have witnessed in long-term care during your 20 years of experience?
3. do you manage and prioritize your daily tasks and responsibilities in a long-term care setting?4. What are some of the common challenges or difficulties you encounter in your job as an LPN in long-term care, and how do you overcome them?
5. In your opinion, what qualities or skills are essential for success as an LPN in the long-term care industry, and how have these qualities contributed to your longevity in this field?
These questions aim to gather information about the LPN's job responsibilities, their perspective on the changes in long-term care, their approach to managing tasks, the challenges they face, and their insights on the qualities required for success in their role.
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In business, a group of people who work together in an attempt to achieve some specific purpose is known as a(n) _____. Multiple choice question. cadre symposium cohort organization
Answers
There are different kinds of firms. In business, a group of people who work together in an attempt to achieve some specific purpose is known as an organization.
What is an organization?An organization is regarded as a combination or a group of people that are said to be working together such as an association, a charity, a union, etc.
The word organization also connote a group or business, or to the process establishing something.
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please help (:
20 pts !!
Answers
I assume this is referring to the font point (pt) or the font size, for example, 11pt as you have on that image.
If this is referring to the name of the specific part of a word processing program to change font size please let me know and I will do some searching to find your answer.