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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...

#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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