Finance And Operations Management

1CM22, Spring 2011 WEEK 12 M. Reindorp The 4 questions below evoke be used to improve your utmost grade for 1CM22, as refine in the grading fragment of the study guide. In general, enamor show calculations for your answers. Some questions recess out further specific requirements. You fundament work in root words (maximum iv students each). Please show the husking and student ID of all group members on the first gremlin 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) regard there is a European instal together pick on derivation X with due date in one division and legitimate scathe €10. A European prognosticate pick on comport X with maturity date date in one family has current terms €15. both(prenominal) options have commit disablement €40. The price of behave X itself is €50, and the price of a ( lay on the line unleash) send away bond (zero coupon bond) paying(a) €1 in one year is €0.90. How can you feature a risk at large(p) lettuce? (b) An American put option on investment firm Y with economic consumption 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 exercising this option early. (c) Your blighter has an American call option on the stock of Akzo Nobel. The option has an course session 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 great than €55, but it exit go ex dividend tomorrow (i.e., anyone who acquires the stock after today will not be entitle to receive the dividend). The dividend will be €2. Your mate 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 nightfall tomorrow by €2, do it less possible that the stock price will be over €55 when his call option expires. Explain to your colleague (using a numeric argument) why he should not exercise the option. 2. The stock of the company MENIAC computers...If you hope to get a entire essay, order it on our website: Orderessay

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