Investments, 11th Edition (exclude Access Card)
11th Edition
ISBN: 9781260201543
Author: Zvi Bodie Professor; Alex Kane; Alan J. Marcus Professor
Publisher: McGraw-Hill Education
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Chapter 20, Problem 7PS
a.
Summary Introduction
To calculate: The Price of 3 month put option on P.U.T.T stock at an exercise price of $100 if the risk interest rate is 10% p.a.
Introduction:
Put-call parity: The put-call parity equation is used to calculate the put price. This equation says that the call option and exercise price is equal to the stock value and put option.
b.
Summary Introduction
To explain: Simple strategy of option for the future movement of stock prices and how far it will move to make a profit on initial investment.
Introduction: The social and economics factor affects the stock prices. Put-call parity is used to determine the value of the call option.
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The common shares of Almond Beach Inc, have a beta of 0.75, offer areturn of 9%, and have an historical standard deviation of return of17%. Alternatively, the common shares of Palm Beach Inc. have a betaof 1.25, offer a return of 10%, and have an historical standarddeviation of return of 13%. Both firms have a marginal tax rate of37%. The risk-free rate of return is 3% and the expected rate ofreturn on the market portfolio is 9½%.1. Which company would a well-diversified investor prefer to investin? Explain why and show all calculations.2. Which company Would an investor who can invest in the shares ofonly one firm prefer to invest in? Explain why.
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Chapter 20 Solutions
Investments, 11th Edition (exclude Access Card)
Ch. 20 - Prob. 1PSCh. 20 - Prob. 2PSCh. 20 - Prob. 3PSCh. 20 - Prob. 4PSCh. 20 - Prob. 5PSCh. 20 - Prob. 6PSCh. 20 - Prob. 7PSCh. 20 - Prob. 8PSCh. 20 - Prob. 9PSCh. 20 - Prob. 10PS
Ch. 20 - Prob. 11PSCh. 20 - Prob. 12PSCh. 20 - Prob. 13PSCh. 20 - Prob. 14PSCh. 20 - Prob. 15PSCh. 20 - Prob. 16PSCh. 20 - Prob. 17PSCh. 20 - Prob. 18PSCh. 20 - Prob. 19PSCh. 20 - Prob. 20PSCh. 20 - Prob. 21PSCh. 20 - Prob. 22PSCh. 20 - Prob. 23PSCh. 20 - Prob. 24PSCh. 20 - Prob. 25PSCh. 20 - Prob. 26PSCh. 20 - Prob. 27PSCh. 20 - Prob. 28PSCh. 20 - Prob. 29PSCh. 20 - Prob. 30PSCh. 20 - Prob. 31PSCh. 20 - Prob. 1CPCh. 20 - Prob. 2CPCh. 20 - Prob. 3CPCh. 20 - Prob. 4CPCh. 20 - Prob. 5CP
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