EBK PERSONAL FINANCE
EBK PERSONAL FINANCE
7th Edition
ISBN: 8220100659713
Author: KEOWN
Publisher: PEARSON
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Chapter 4, Problem 12PA
Summary Introduction

To explain:

The things to be done on preparation of an audit and the actions to be taken if the audit does not turn out favorably.

Introduction:

Tax audit refers to the examination of the tax return filed by an individual or a tax payer to confirm the true or fair value of the tax paid. It is done by verifying all required document through which the amount of the tax deductions and exemptions can be justified.

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Assume a volatility of 25%. What is going to be the hedging ratio for a replicating portfolio for an option that pays $0$ in the case of good state of the world and $2$ in the BAD state of the world. Assume the option expires in half a year and the current stock price is 20$ ( Hint: form the replicating portfolio and calc the alpha for this payoff )  p.s. Don't chase bps !!   -0.28   -0.14   -0.89   NONE OF THE ABOVE
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