You are considering buying a Repurchase Agreement (i.e., taking a purchase repo position). You uncover the following information about the instrument. Par = $1,000,000 Maturity = 49 days Current price = $ 987,025 What is the Repo's yield?
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- Given the following variables: S = $50, E = $45, T = 1 year, r = 2 %, and P = $5; if the call option is selling for $11 (C = $11), what arbitrage opportunity exists? Outline the strategy and the profit to be realized.Suppose that we can describe the world using two states and that two assets are available, asset K an asset L. We assume the asset’s future prices have the following distribution State Future Price Asset K Future Price Asset L 1 $55 $60 2 $45 $30 The current price of asset K is $50, and the current price of asset L is $50. What is the risk free rate implied by these assets?1. What are the values of the unit claims (C1 and C2)? 2. What is the risk free rate implied by these assets?
- If Po is the initial price of the security, P₁ is the price after you hold it for a year, and X represents a direct payment, an asset's rate of return is equal to: rate of return = (P₁ - Po) rate of return = (P₁ - Po) + X rate of return = (P₁-Po) / Po + XPo rate of return = (P₁ - Po)/Po + XJacques just won the lottery and must choose between three award options: 1. A lump sum of $15,000,000 received today 2. 15 end-of-year payments of $1,875,000 3, 40 end-of-year payments of $1,350,000 For each option in the table, indicate which values to enter for each variable in your financial calculator. Option 1 Option 2 Option 3 40 Payments Lump Sum Payment 15 Payments No. of Periods Annual payment Future Value Present Value FV=0 7 Assume the interest rate is 8.00%, entered as 8 on your financial calculator. Note: Take the absolute value of the present value when answering this question. Using the table you just filled out, along with a financial calculator, yields a present value for option 2 of approximately present value for option 3 of approximately if he seeks to maximize present value. $15,000,000 FV-0 7 and a (when the interest rate is 8.00%). Based on this, Jacques should choose option Now assume the interest rate is 9.00%, entered as 9 on your financial calculator.Which of the following is correct? O A. Common stock valuation usually treats the common stock as a perpetuity. OB. The appropriate measure for risk according to the capital asset pricing model is beta. OC. The present value of a $100 perpetuity discounted at 5% is $2,000. OD. The incremental cost is the cost of making a choice defined in terms of the next best alternative that is foregone. OE. Both B and C.
- Need help solving this, please explain kn detail if possible.H3. Show proper step by step calculation1. Assume that you want to secure a purchase at strike price and you have the following information on hand: Strike = $ 50 Put = $ 6 Call = $ 7 Probable market values at maturity: 30, 40, 50, 60, 70 a) Show the net results that you would obtain under each market value when performing a purchase synthetic forward. b) Show the net flows you would obtain under each market value when performing purchase synthetic forward.
- Assume that K=61, St =65, t = 0.25 (i.e. time to expiry is 3 months), and the risk-free rate is 0.04. The current price of the put option is p = 4. If the price of the call option is 7.17, describe the arbitrage that would be possible, and calculate the profit that would result.Please answer with explanation. I will really upvoteConsider a put option on a stock that currently sells for £100, but may rise to £120 or fall to £80 after 1 year. The risk free rate of return is 10%, and the exercise price is £90. (a) Calculate the value of the put option using the risk-neutral valuation relationship (RNVR). Explain the reasoning behind your calculations.