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
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
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
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%
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 )
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 )
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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