Array Representation A complete binary tree has a simple array representation. Suppose we number the nodes from left to right‚ beginning at the top and ending at the bottom. Then we can store the various data items in the corresponding elements of an array. For example can be represented by the array This in fact corresponds to the level order enumeration of the tree. Note that we only use an initial segment of the array. Provided the array is long enough‚ and we know the number of
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CITIC TOWER II: THE REAL OPTION Suffolk University – FIN- 881 Fall 2014 Name: Abdelrhman El Refaiy Larry Young the Chairman of Citic Pacific Limited has to make a decision to develop a new project under the name Citic Tower II. The development project that will take place in Hong Kong is expected to leave the company with $60 MM in losses as per NPV analysis. Citic’s property development team has set rigid assumptions to build their NPV model that estimated net positive cash inflows at $1.54 billion
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Ans 1: Option A Ans 2: New Required return for HR = 7% + 2*(11% -7%) = 15% New Required return for LR = 7% + .5*(11% - 7%) = 9% So difference is 6% Option E Ans 3: No of stocks = 20 Weight of each stock = 1/20 Beta of portfolio = 1.2 Beta of stock sold = 0.7 Beta of stock bought = 1.4 Hence new portfolio beta = 1.2 -.7/20 + 1.4/20 = 1.2 + .7/20 = 1.235 Option B Ans 4: New Beta = 0.7*1.5 = 1.05 Old required rate of return = 15% So old risk free rate = 15% -5%*.7 =11.5% New Required
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STRATEGIC FINANCIAL MANAGEMENT REVISION 1. Selling Currency Call Options. Mike Suerth sold a call option on Canadian dollars for $.01 per unit. The strike price was $.76‚ and the spot rate at the time the option was exercised was $.82. Assume Mike did not obtain Canadian dollars until the option was exercised. Also assume that there are 50‚000 units in a Canadian dollar option. What was Mike’s net profit on the call option? ANSWER: Premium received per unit = $.01 Amount per unit
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rates currently being swapped for three month LIBOR is 12% per annum for all maturities. The three month LIBOR rate one month ago was 11.8% per annum. All rates are compounded quarterly‚ what is the value of the swap? 4. A four month European call option on a non-dividend paying stock is currently selling for $5. The stock price is $64‚ the strike price is $60 and a dividend of $0.80 is expected in one month. The risk free interest rate is 12% per annum for all maturities. What opportunities are there
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Problem 20-6 on Call Options Based on Chapter 20 (Excel file included) You own a call option on Intuit stock with a strike price of $40. The option will expire in exactly 3 months’ time. a) If the stock is trading at $55 in 3 months‚ what will be the payoff of the call? b) If the stock is trading at $35 in 3 months‚ what will be the payoff of the call? c) Draw a payoff diagram showing the value of the call at expiration as a function of the stock price at expiration. Short call: value at expiration
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Chapter 14 14.3. Explain the principle of risk-neutral valuation. The price of an option or other derivative when expressed in terms of the price of the underlying stock is independent of risk preferences. Options therefore have the same value in a risk-neutral world as they do in the real world. We may therefore assume that the world is risk neutral for the purposes of valuing options. This simplifies the analysis. In a risk-neutral world all securities have an expected return equal to risk-free
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MFIN6003 Derivative Securities Dr. Huiyan Qiu End-of-chapter Questions for Practice (with Answers) Following is a list of selected end-of-chapter questions for practice from McDonald’s Derivatives Markets. For students who do not have a copy of the McDonald’s book‚ be aware that a copy of the book is reserved at the main library of the University of Hong Kong for you to borrow for short period of time. Answers provided are for your reference only. It is complied directly from the solution
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glossary‚ determine if the FASB considers options as securities or cash. Explain your position. The FASB considers options as securities. This is evident by the definition provided by the master glossary that states “unless otherwise stated‚ a call option that gives the holder the right to purchase shares of common stock from the reporting entity in accordance with an agreement upon payment of a specified amount. Options include‚ but are not limited to‚ options granted to employees and stock purchase
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Analysis of “Allemande” from J.S. Bach’s English Suite No. 3 in G minor. I have analysed Bach’s allemande from the English suite no. 3 using the Schenkerian method‚ by reducing the score down to its basic foundations‚ in order to show how the work can be understood on the foreground‚ middle ground and background levels. In order to this‚ I have taken away unnecessary notes‚ such as the neighbour and passing notes‚ to leave the score as a basic four part chorale-like piece with two chords to
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