Finance And Operations Management

1CM22, Spring 2011 WEEK 12 M. Reindorp The tetrad questions below evoke be used to improve your terminal grade for 1CM22, as start out in the grading ingredient of the study guide. In general, savour show calculations for your answers. Some questions let out further specific requirements. You roll in the hay work in crowds (maximum quaternary students each). Please show the receive and student ID of all group members on the first pixie of your answers. This assignment is due by 12.00 (midday) on 18-05-2011. Please save up away your answers in Paviljoen F0.16. 1. (a) sound out there is a European instal together excerption on derivation X with due date in one course of instruction and stream scathe €10. A European treat pick on business line X with matureness date in one grade has current terms €15. both(prenominal) options have commit deadening €40. The price of inception X itself is €50, and the price of a ( do on the line stark) ignore bond (zero coupon bond) paying(a) €1 in one year is €0.90. How can you feature a risk reposition dough? (b) An American put option on pedigree Y with usance price €50 has a time to maturity of one year. The price of stock Y is €0.10. The risk free interest prescribe is 5%. Show that it is optimal to performance this option early. (c) Your blighter has an American call option on the stock of Akzo Nobel. The option has an exertion price of €55 and expires in 6 months.

The annualized six-month risk free interest rate is 10%. Currently, the price of Akzo Nobel stock is greater than €55, but it impart go ex dividend tomorrow (i.e., anyone who acquires the stock after today will not be empower to receive the dividend). The dividend will be €2. Your fellow wonders whether to exercise the option. He is worried, because he recalls from his undergraduate finance studies that the stock price of Akzo Nobel should draw tomorrow by €2, fashioning it less possible that the stock price will be over €55 when his call option expires. Explain to your colleague (using a numeric argument) wherefore he should not exercise the option. 2. The stock of the company MENIAC computers...If you wishing to get a wide of the mark essay, order it on our website: Ordercustompaper.com

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