#2. Develop an equity screen – find 25 undervalued stocks
#3. Take one of the undervalued stocks from your screen in #2 and prepare a financial analysis of this stock. That is, estimate the expected return on the stock and compare it with the required return using the CAPM. What is your estimate of alpha?
#4. Graph the profit/loss for the following options positions
Long at-the-money call with strike 40 and premium 2;
Short at-the-money put with strike 40 and premium 2
Combination of the long call and short put, both with and
Bull spread: buy call with strike 40 and premium 2;
and sell call with strike 44 and premium 1
Long straddle: buy call and put both with strike 40 and premium 3
Short straddle: sell call and put, both with strike 40 and premium 3
#5. Suppose the price of a non-dividend paying stock is 40 and can go to 36 or 44 in 1 period
Assume the risk free rate is zero for this period.
Find the value of a call option with strike 40
Find the value of a put option with strike 38
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