Ch 8and9 - 25 7 30-25= 5 7-5= 2 e e price old. rket makers...

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Ch 8 Questions (pg329) 1(a,b), 2/Problem 1 Questions 1 a) Option the right to buy or sell an asset at a set price within a certain time Call Option is the right to buy a stock at a set price in a set amount of time Put Option the right to sell a stock at a set price in a set amount of time b) Exercise Value is the greater of 0 or the current price of the stock minus the strik Strike Price is the predetermined price at which the stock will be bought or so 2 Why do options sell at prices higher than exercise values? options sell at values higher because of time value, and implied volatilility; and the mar Problems 1 30
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Unformatted text preview: 25 7 30-25= 5 7-5= 2 e e price old. rket makers bid/ask spread. Ch 9 Problems 3, 5, 6, 7, 11 3 Dps/Vps-Float= 4.50/50-0 Dps= 4.5 Vps= 50 Float= 0.09 9% 5 Rdcf=(D1/Po)+g (3.00/36)+0.05 D1= 3 Po= 36 g= 0.05 0.13 13.33% 6 rCAPM=rRF+(rM-rRF)beta 6%+5.5%(.8) beta= 0.8 3month rR 4 10 year b= 6 past rM= 15 rPM= 5.5 10.4 % 7 debt 300 million rd= 6%(1-.40)= 0.36 % PS 50 million rPS= 5.8 % CE/CS 250 million rS= 12 % 600 million 40 % tax rate 30 % debt 5 % PS 65 % CS 100 % WACC=.30(3.6)+.05(5.8%)+.65(12%) WACC= 9.17 11 5 8.0%-4.42 6.5 2.6 2.6*(1-8%) 2.81 2.81/36= 0.08 0.078013-8%= 15.8%...
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This note was uploaded on 07/02/2011 for the course FIN 5880 taught by Professor Unknown during the Spring '08 term at Webster.

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Ch 8and9 - 25 7 30-25= 5 7-5= 2 e e price old. rket makers...

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