FCF 9th edition Chapter 25

FCF 9th edition Chapter 25 - Chapter 25 Problems 1-30 Input...

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Chapter 25 Problems 1-30 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-in" be installed in Excel. To install these, click on "Tools|Add-Ins" and select "Analysis ToolPak" and "Solver Add-In."
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Chapter 25 Question 1 Input Area: Initial investment $1,000 # of years 9 Rate of return 11% Output Area: FV $2,691.23
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Chapter 25 Question 2 Input Area: Amount needed $15,000 # of years 8 Rate of return 9% Output Area: PV $7,301.28
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Chapter 25 Question 3 Input Area: Current stock price $62 Exercise price $60 Call option $4.10 Expiration (months) 3 Risk-free rate 2.6% Output Area: Put price $1.71
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Chapter 25 Question 4 Input Area: Expiration (months) 6 Exercise price $50 Put option $5.08 Current stock price $47 Risk-free rate 4.8% Output Area: Call price $3.27
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Chapter 25 Question 5 Input Area: Exercise price $70 Expiration (months) 3 Put option $3.10 Call option $4.35 Risk-free rate 4.8% Output Area: Stock price $70.42
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Chapter 25 Question 6 Input Area: Exercise price $65 Expiration (months) 4 Put option $1.05 Call option $6.27 Current stock price $69.38 Output Area: Rate 3.90%
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Chapter 25 Question 7 Input Area: Expiration (months) 5 Put option $8.10 Call option $6.12 Exercise price $70 Current stock price $66.81 Output Area: Interest rate 4.18%
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Chapter 25 Question 8 Input Area: Current stock price $69 Exercise price $70 Risk-free rate 6% Expiration (months) 3 Standard deviation 41% Output Area: 0.1055 (0.0995) 0.5420 0.4604 Call $5.65 Put $5.61 d 1 d 2 N(d 1 ) N(d 2 )
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Chapter 25 Question 9 Input Area: Current stock price $86 Exercise price $90 Risk-free rate 5.50% Expiration (months) 4 Standard deviation 62% Output Area: 0.1032 (0.2548) 0.5411 0.3995 Call $11.24 Put $13.60 d 1 d 2 N(d 1 ) N(d 2 )
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Chapter 25 Question 10 Input Area: Current stock price $89 Exercise price $85 Risk-free rate 5% Expiration (months) 9 Standard deviation 39% Output Area: 0.4161 0.6613 For a call option the delta is 0.6613 For a put option, the delta is (0.3387) The delta tells us the price of an option for a $1 change in the price of the underlying asset. d 1 N(d 1 )
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Chapter 25 Question 11 Input Area: Current selling price $1,900,000 Price % increase 10% Standard deviation 20% Option to buy $2,050,000 Expiration (months) 12 Risk-free rate 5% Output Area: The 'stock' price is $1,900,000 and the exercise price is $2,050,000 (0.0299) (0.2299) 0.4881 0.4091 Call $129,615.91 d 1 d 2 N(d 1 ) N(d 2 )
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Chapter 25 Question 12 Input Area: Current selling price $1,900,000 Price % increase 10% Standard deviation 20% Option to sell $2,050,000 Expiration (months) 12 Risk-free rate 5% Call $129,615.91 Output Area: Put $179,636.23 You would have to pay $179,636.23 in order to guarantee the right to sell the land for $2,050,000
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Chapter 25 Question 13 Input Area: Stock price $84 Exercise price $80 Risk-free rate 6% Expiration (months) 6 Standard deviation 53% Output Area: a. 0.3976 0.0229 0.6545 0.5091 Call $15.46 Put $9.09 Call intrinsic value $4 Put intrinsic value $- b. Call option time value $11.46 Put option time value $9.09 c. The time premium (theta) is more important for a call option than a put option, therefore, the time premium is, in general, larger for a call option.
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