5 Assume the spot Swiss franc is $0.7072 and the six-month forward rate is $0.6986. What is the minimum price that a six-monthAmerican call option with a striking price of $0.6836 should sell for in a rational market? Assume the annualized six-month Eurodollarrate is 3.5 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.)Minimum price of call optioncentsAssume the spot Swiss franc is $0.7020 and the six-month forward rate is $0.6990. What is the Value of a six-month call option with astrike price of $0.6820 should sell for in a rational market? Assume the annualized six-month Eurodollar rate is 3.50 percent. Assumethe annualized volatility of the Swiss franc is 14.20 percent. Use the binomial option-pricing model to value the call option. (Do notround intermediate calculations. Round your answer to 2 decimal places. Enter your answer in cents per Swiss Franc.)Value of call optioncents per SF

The formula used for the below calculation- Call Price= Spot Price- Exercise Price/(1+Rate)period

Answered: Assume the spot Swiss franc is $0.7072…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A US investor sees an arbitrage opportunity in the currency markets. The spot exchange rate between the Swiss Franc and US Dollar is 1.0404 ($ per CHF). Assume the continuously compounded interest rates in the US and Switzerland are 0.25% and 0%, respectively. The 3-month currency forward price is 1.0300 ($ per CHF). What is the theoretically correct forward price. What is the investor’s total profit (in CHF), assuming she begins by borrowing 1,000 CHF? ?
Suppose 6-month Treasury bills are trading at a YTM of 1.6%, 12-month T-bills are trading at a YTM of 2.9%. If 18-month Treasury notes with a coupon rate of 3% are trading at par ($100), then what is the 18-month spot rate?
Suppose that a bond is purchased between coupon periods. The days between the settlement date and the next coupon period is 115. There are 183 days in the coupon period. Suppose that this bond has a coupon rate of 7.4% and there are 10 semiannual coupon payments remaining. Assuming that the par value is $100, what is the “clean price” for this bond if a 5.6% discount rate is used? What is the accrued interest for this bond? What is the “dirty price?”
Hilton a US based Multinational Company will receive 2,000,000 Euros in one-year time from items it exported. It did not hedge this transaction; Hilton believes that the future value of the Euro will be determined by Purchasing Power Parity (PPP). It expects that inflation in countries using Euro will be 12% next year, while inflation in the US will be 7% next year. The spot rate of Euro is $ 1.46 and the one-year forward rate is $1.50 Required: Estimate the amount of US dollars that Hilton will receive in the one year when converting its Euro receivables into US dollar The spot rate of the Australian dollar is pegged at $ 0.13. Hilton believes that the Australian dollar will remain pegged to the US dollar for the next year. If Hilton decides to convert its 2 million Euros into Australian dollar instead of US dollars at the end of one year, estimate the amount of Australian dollars that Hilton will receive in one year when converting its Euro receivables into Australian dollars.
You are planning to become a millionaire (i.e., save $1 M) over the next 30 years when you finally retire. a) If you are earning interest at the rate of 5% and you live 15 years after retirement, what annual level of living expenses can you afford with your savings? b) Suppose your retirement living expenses will increase at an annual rate of 3% due to inflation. Determine the annual spending plan in line with your inflation
I want to be earning an annual salary of $100,000 when I retire in 14 years. I have been offered a job that guarantees an annual salary increase of 4% per year, and the starting salary is negotiable. What is the lowest salary that I should request in order to meet my goal? (Round your answer to the nearest cent.)
The average median 2019 price of a home here in Columbia, SC was around $145,000. That price is not bad at all (surprisingly good!!). Given that the interest on the housing loan is roughly 3.92% and the deal is over 30 years, what should you approximately expect your monthly payments to be if you decide to purchase a house here in Columbia?
Suppose you pay $971 for a 10=year Treasury bond that has a face value of $1,000 and a coupon rate of 5%. If you sell the bond one year later for $1,013, what is your one-year rate of return? (Give your answer as a percentage, round your answer to two decimal places; e.g., 4.37 for 4.37%)
To make CDs look more attractive as an investment than they really are, some banks advertise that their rates are higher than their competitors' rates; however, the fine print says that the rate is based on simple interest. If you were to deposit $16,000 at 10.00% per year simple interest in a CD, what compound interest rate would yield the same amount of money in 3 years? (Round the final answer to three decimal places.) The compound interest rate that would yield the same amount of money in 3 years is % per year.
The value of land in Manhattan was around $150 billion in 2008. Imagine that it is 1626 and you are the economic advisor to the Dutch when they are considering whether to buy Manhattan from the Manhasset Indians. Further,assume that the relevant interest rate for calculating the present value is 4%per year. Would you advice the Dutch that a purchase price of $24 is a good deal or not? How would your answer change if the interest rate were 6%? And 8%? (Hint: for each interest rate,calculate the present value in 1626 of the land value as of 2008. Then compare that with the purchase price in 1626. For example, simplify by assuming that the owners collect no rents on the land. As an advanced further question,assume that the rent equals 2% of the value of the land each year.)
a = F + 0, B = S + 4 Q = T + 1. By using these values of a, B, and Q, Solve al| questions of the following questions. Consider %3D %3D %3D
Compute the discount if $ 2,000 is discounted for 6 months at 8% simple interest

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