A non-dividend paying stock is selling for $52.50.The standard deviation of its returns is 45% p.a.The risk free rate is 4% p.a. Calculate your answer based on this input table.InputsStandard Deviation (annual) 45%Maturity (in years) 0,50Risk-Free Rate (annual) 4%Exercise Price $50,00Dividend Yield (annual) 0Stock Price=$52.50 $52,50 d1 is: 0,375286(b) What is the hedge ratio of the call?

To calculate the hedge ratio of the call, we use the Black-Scholes formula:d_1 =ln{S}/{X} + (r +…

Answered: A non-dividend paying stock is selling…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

What is the required rate of return on a preferred stock with a $50 par value, a stated annual dividend of 12% of par, and a current market price of (a) $25, (b) $34, (c) $42, and (d) $63 (assume the market is in equilibrium with the required return equal to the expected return)? Do not round intermediate calculations. Round the answers to two decimal places. % % % %
Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the band - yield - plus - nisk - premium approach, and the DCF model. Burton expects next year's annual dividend, D₁, to be $1.70 and it expects dividends to grow at a constant rate g = 5,4% The firm's current common stock price, Po, is $20.00. The current risk-free rate, FRF, = 4.9% the market risk premium, RPM = 6.3%, and the firm's stuck has a current beta, b, = 1.40. Assume that the firm's cast of debt, rd is 10.78%. The firm uses a 3.3% risk premium when arriving at a ballpark estimate of its cost of equity using the bund-vield-risk-premium approach. What is the firm's cost of equity using each of these three approaches? CAPM cost of equity. Band yield plus visle premium: DCF cost of equity: % 1. %
Risk-Free rate (Rf) is 5% Market risk premium (Rm-Rf) is 5% Beta of the stock is 1.5 Last dividend (D0) is 1.00 AZN Next year dividend (D1) will be 10% higher Next year price (P1) will be 25.00 AZN With this given information, what is the stock price (P0) now? 21.24 AZN 0.97 AZN 23.20 AZN 22.22 AZN
You are considering purchasing a share of preferred stock with the following characteristics: par value = $100 dividend rate = 12% per year payment schedule = quarterly maturity date = required rate of return = 6% per year current market price = $135 per share Based on this information, answer the following: A. What is the dollar amount of the quarterly dividend on this stock? B. Using the Discounted Cash Flow Method, what is the dollar value of this stock? C. Using the Discounted Cash Flow Method, what is the annual expected return for this stock? D. Based on your answer to part B, should you invest in the stock? Why or why not? E.…
You are analyzing a stock that is currently selling for $18.92. Yesterday, this firm announced EPS of $1.88. You feel it is reasonable to assume that earnings will grow at about 1.85% into the future. Based on this assumption, what is the yield on this stock at its current price? 10.22% 11.79% 11.97% 9.44%
4.StockA sells for $40 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows: Probability Stock Price Boom $50 Normal economy 42 Recession 30 50% 30% 20% Dividend $2.00 1.00 0.50 a.Calculate the expected holding-period return and standard deviation of the holding period return. b.Calculate the expected return and standard deviation of a portfolio invested half in this stock and half in Treasury bills. The return on bills is 4%.
Consider three stocks: Q, R and S Beta STD (annual) Forecast for Nov 2009 Dividend Stock Price Q 0.45 35% $0.50 $45 R 1.45 40% 0 $75 S -0.20 40% $1.00 $20 Use a risk free rate of 2.0% and an expected market return of 9.5%. The market's standard deviation is 18%. Assume that the next dividend will be paid after one year, at t=1. Required: According to CAPM, what is the expected rate of return of each stock?
Based on the Capital Asset Pricing Model (CAPM) and the diagram below, what is the return of the stock if its beta is 1.2 or 0.8?
Use the following information to answer questions 1- 2 XQV’s stock is trading at $40. Earnings per share are expected at E1 = $5.00; all will be paid out as dividends. Valuing the stock as a perpetuity P0 =E1 / r, the expected return is 12.5%. The risk-free rate is 6%; the market risk premium is 8%. XQV’s beta is 0.875. The stock is ………………………………………………….. Group of answer choices a. overpriced b. fairly priced c. underpriced 2. Its alpha is ………..……………………… %.
A&Z Corporation common stock has a beta, b, of 1.2. The risk-free rate is 6%, and the market return is 11%. A. Determine the risk premium on A&Z common stock. Format: 1% B. Determine the required return that A&Z common stock should provide. Format: 11% C. Determine A&Z’s cost of common stock equity using the CAPM. Format: 11%
A stock is selling for $80 in the market. The company’s beta is 1.5, the market risk premium (rM - rF) is 6%, and the risk-free rate is 2%. The most recent dividend paid is D0 = $2 and dividends are expected to grow at a constant rate g. What’s the dividend growth rate g for this stock? find the stock’s capital gain yield. 8.29% 4.19% 7.68% 7.81%
A stock has an average return of 0%. On an average day it moves 1% in absolute value, the average up move is 1% and the average down move is -1%. If returns are normal distributed what is the daily volatility of the stock. A. 0% B. 1% C. 1.25% D. 2%

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS

A non-dividend paying stock is selling for $52.50.
The standard deviation of its returns is 45% p.a.
The risk free rate is 4% p.a.

Calculate your answer based on this input table.
Inputs
Standard Deviation (annual)			45%
Maturity (in years)			0,50
Risk-Free Rate (annual)			4%
Exercise Price			$50,00
Dividend Yield (annual)			0
Stock Price=$52.50			$52,50

d1 is:			0,375286