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- hi could you please help solve exercise 5.24?Which of the following denotes the duration till which the investor has to wait for the break even? Options:- Profitability period - Wait time- Payback Period- Net Present ValueConsider the three calls from the previous problem expiring in T = 1 year. Suppose that the premium of the three options are $7, $3, $1 for A, B, and C, respectively, today (time 0). Suppose the price on the stock today is $14. Suppose the risk-free rate is constant at 5%. Graph the profit function for the butterfly strategy at time T taking into consideration the time value of the initial cost. By how much would the asset have to change over the year for your butterfly portfolio to be a loss?
- It is given that dP/dt = rP (r being the annually compounded interest rate and P is the amount in the account at any given time). Suppose that an account earns at an annual rate of r percent compounded continuously and a person is drawing an income of H dollars per year withdrawn continuously (impossible, but a modeling assumption). Use phase line analysis to analyze the behavior of the account. Discuss the meaning of any equilibrium points and their stability. If r = 10% (a reasonable rate for long-term stock investments), and H = $10,000, how long should an initial investment of $50,000 be left untouched so that when withdrawals begin the capital is not depleted?Please provide detailed solution and give the explanation of correct and incorrect options.3. Excel Question. Download the monthly NASDAQ prices (1985-2023) from Brightspace.What is the simple arithmetic average return over this period?What would have been your annualized HPR if you invested (reinvesting the proceeds)over this period? Disregard the question, I just put it there for your reference. But how do i compute the arithmetic average return for this? Please just tell me how to compute it. I am not asking you to solve it. And also tell me how to compute the annualized HPR using the data
- Suppose the nominal rate of return is 0.085 and the risk-free rate is 0.010. What is the risk premium? Instruction: Round to two decimal places. E.g., if your answer is 0.0106465 or 1.06465%, you should type ONLY the number .01, neither 0.0106465, 0.0106, nor 1.065. Otherwise, Blackboard will treat it as a wrong answer.Suppose someone offers to pay you $1,000 in one year. Which of the following is/are correct? Select all that apply. O If inflation goes up, the present value of that $1,000 would go down. O If your time preference goes up (i.e., you become more impatient), the present value of that $1,000 for you would go down. If interest rates go up, the present value of that $1,000 would also go up. O If uncertainty in the economy goes up, the present value of that $1,000 would also go up.This is part a) question and it's answer in order to answer part b) question Question: You hold a consol that pays a coupon C in perpetuity. The current interest rate is i, and the average expectation in the market is that this will remain unchanged. What will be the price of the consol today? answer : According to the question we need to calculate the current price of the perpetual consol. Perpetual consoles are priced differently because their expected income is spread through an indefinite period. So, perpetual consoles are priced using the current yield. The current yield is calculated as:- coupon amountMarket price×100coupon amountMarket price×100 After calculating the current yield price is calculated by the above formula where, i = Current interest rate y = yield so, the price of this consol will be Price = i/y I please need the solutions for part b) question b) In the next period however, the interest rate changes unexpectedly to i . What is the new price of the bond? If…
- This section asks you to calculate prices for various options. In all cases, consider a rate r = 7.97% per year. Estimate the volatility of returns using the estimator: 1 n-1 σ²≈ T-t i=0 Si+1 log. Sti 2 The term of each option will be T = 182/360 (half a year). Determine a reasonable strike K, which is at similar levels to the price series you have downloaded. An option is a derivative instrument that gives its holder the right to buy or sell an underlying asset at a pre-agreed price K at a future date T. If this right can only be exercised in time T, we say that the option is of the European type. If it can be exercised at T or at any time prior to T, then we say that the option is American. Likewise, if the option grants the right to buy, we say that the option is Call type, if it grants the right to sell then the option is Puttype. These types of options are the simplest and are known as European vanilla options. In this case, if T is the expiration date of the contract, and St is…what does it mean when there is a outlier jump In time value as intrinsic value of the a call option decreases, is this just an outlier? or can this be explained. The call premium is 2.8Can you confirm if this answer is correct? Would it be upward sloping?
