2214AFE Derivative Securities: Assignment questions Problem 1: Properties of Options (4 marks) Consider a four-month European call option on a dividend-paying stock. The stock price is $75, the strike price is $70, and a dividend of $1.50 is expected in three months. The risk-free interest rate is 8% per annum for all maturities. a. What is the lower bound for the price of this call? b. Assume that the call is currently selling for $3. Describe in detail with which strategy you can gain an arbitrage profit and how much this profit will be. Problem 2: Properties of Options (6 marks) The price of a European call that expires in six months and has a strike price of $50 is $5. The underlying stock price is $52, and a dividend of $1.00 is expected in three months. The term structure is flat, with all risk-free interest rates being 10%. a. What is the price of a European put option on the same stock that expires in six months and has a strike price of $50? b. Explain in detail the arbitrage opportunities if the European put price is $0.50. How much will be the arbitrage profit? Problem 3: Binomial Trees (5 marks) A stock price is currently $30. Over each of the next two three-month periods it is expected to go up by 8% or down by 10%. The risk-free interest rate is 5% per annum with continuous compounding. a. Use a two-step binomial tree to calculate the value of a six-month European put option with a strike price of $32. b. Use a two-step binomial tree to calculate the value of a six-month American put option with a strike price of $32. c. Use a two-step binomial tree to calculate the value of a six-month European call option with a strike price of $32. d. Show whether the put-call-parity holds for the European put and the European call. e. Calculate the deltas of the European put and the European call at the different nodes of the binomial three. Hint: You need to calculate three deltas for the call and three deltas for the put. Problem 4: Binomial Trees (5 marks) A stock price is currently $40. During each two-month period for the next four months it is expected to increase by 10% or decrease by 8%. The risk-free interest rate is 5%. Use a two-step tree to calculate the value of a derivative that pays off (max[(ST-35),0]) 2 where T S is the stock price in four months. a. Use no-arbitrage arguments (you need to show how to set up the riskless portfolios at the different nodes of the binomial tree). b. Use risk-neutral valuation. c. Verify whether both approaches lead to the same result. d. If the derivative is of American style, should it be exercised early? (continues on next page) Problem 5. Valuing Stock Options: The Black-Scholes-Merton Model (10 marks) This is a Bloomberg-based exercise. Before making any calculations, please do the following: ? Go to the Trading Room and login in Bloomberg (G42 2.16 at Gold Coast Campus and N50 0.32E at Nathan Campus). You can find the Trading Room timetable in the folder “Bloomberg Activities” under “Course Content” on L@G. In the same folder, you can also find materials which will be useful for your work with Bloomberg. ? Search for the share of Google (Bloomberg ticker: GOOGL). Download daily price data for the Google share price over the last 250 trading days. ? Go to the Options Monitor showing option contracts on the Google share (Use OMON ). ? Find the put and the call options with o Expiration in October 2017 and o Strike price $940 Make screenshot(s) showing the prices of these options. Hint: You can make screenshots and email them to yourself via GRAB . ? Use LR to obtain a LIBOR value for the same day as the option price data. Choose the USD LIBOR with time horizon closest to the time-to-maturity of the options. Document with a screenshot. Once you have this data, you can start with the calculations: (a) Calculate with Excel the daily returns of the Google share and calculate afterwards their standard deviation over the last 250 days. (b) Convert the daily volatility to volatility per annum. (c) Use the Black-Scholes-Merton pricing formulas for European options and calculate the theoretical prices of a European call and a European put option with expiration in October 2017 and strike price of $940 on the Google share. Use the LIBOR rate you have downloaded as a proxy of the risk-free rate. (d) Insert the Black-Scholes-Merton prices you just calculated in the put-call-parity. Does it hold? (e) How would the result of (c) change if a dividend of $2 is expected in four months? (f) Compare the Black-Scholes-Merton prices you calculated in (c) with the prices of these options given in Bloomberg (use the average of bid and ask price as the Bloomberg price). Are there any deviations between the theoretical prices you have calculated and the prices given in Bloomberg? If yes, what could be possible reasons for these deviations? Hint: There are no dividends announced for August, September and October 2017. Additional submission requirements for problem 5: ? Additionally to your calculations, please insert in the Word file that you will submit the screenshots you have made showing the spot price, option prices and LIBOR which you used. ? Upload the Excel file showing the calculation of the standard deviation in (a).

 

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25503 Investment Analysis
Assignment—Part I
Spring 2019
1. The assignment should be completed in groups of maximum 4 students (your group
does not need to be in the same tutorial class). All group members receive the
same mark.
2. One representative from each group must email the subject coordinator (at
[email protected]) by 5pm Friday 9 August 2019 with the names
and student numbers of all the group members. No changes can be made to group
membership after this date without obtaining consent from the subject coordinator.
It is your responsibility to find a group, keep the group together, and to ensure that
all deadlines are met.
3. Help: For consultation times, please check UTSOnline and the subject outline.
Note that email is not an efficient way for asking questions about the assignment;
please post any questions on the UTSOnline discussion board.
4. Due date: A hard copy of the assignment should be submitted in the assignment
box marked “FINANCE 4” located in Building 8, Level 5, by 5:00pm Monday
2 September 2019. Late submissions will not be accepted and no soft copy is
required.
5. Complete a cover sheet (available on UTSOnline) with all the signatures from your
group members and attach it to a printout of your answers.
6. The assignment computations are to be done in Excel, but the solutions may be
pasted into Word and formatted for submission. The final report, including all
text, tables and figures should be printed out on A4 paper with a minimum font
size of 12. Also, the final report (excluding the cover sheet) should not exceed 12
pages in length.
7. Do not round your interim calculations. Your final values should be rounded to the
nearest 6th decimal for reporting purposes.
Subject Coordinator: Vitali Alexeev
Document Preview:

Finance Discipline GroupUTS Business School25503 Investment AnalysisAssignment|Part ISpring 20191. The assignment should be completed in groups of maximum 4 students (your groupdoes not need to be in the same tutorial class). All group members receive thesame mark.2. One representative from each group must email the subject coordinator ([email protected]) by 5pm Friday 9 August 2019 with the namesand student numbers of all the group members. No changes can be made to groupmembership after this date without obtaining consent from the subject coordinator.It is your responsibility to nd a group, keep the group together, and to ensure thatall deadlines are met.3. Help: For consultation times, please check UTSOnline and the subject outline.Note that email is not an ecient way for asking questions about the assignment;please post any questions on the UTSOnline discussion board.4. Due date: A hard copy of the assignment should be submitted in the assignmentbox marked FINANCE 4″ located in Building 8, Level 5, by 5:00pm Monday2 September 2019. Late submissions will not be accepted and no soft copy isrequired.5. Complete a cover sheet (available on UTSOnline) with all the signatures from yourgroup members and attach it to a printout of your answers.6. The assignment computations are to be done in Excel, but the solutions may bepasted into Word and formatted for submission. The nal report, including alltext, tables and gures should be printed out on A4 paper with a minimum fontsize of 12. Also, the nal report (excluding the cover sheet) should not exceed 12pages in length.7. Do not round your interim calculations. Your nal values should be rounded to thenearest 6th decimal for reporting purposes.Subject Coordinator: Vitali Alexeev1You will nd an Excel workbook called AssignmentData.xlsx on UTSOnline which is neededto complete this assignment. It contains weekly index data for several country indices.Due to the reputation…

Attachments:

AssignmentPar….pdfAssignmentDat….xlsx

 

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3-15. (Working with financial statements) Based on the information for T. P. Jarmon Company for the year ended December 31, 2012: a. How much is the firm’s net working capital and what is the debt ratio? b. Complete a statement of cash flows for the period. Interpret your results. c. Compute the changes in the balance sheets from 2011 to 2012. What do you learn about T. P. Jarmon from these computations? How do these numbers relate to the statement of cash flows?

 

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3.1 Supply & Demand Essay

This essay will help you to prepare for writing your 3,000 word academic essay during Phase 3 as well as helping you to learn about supply and demand. It is your opportunity to put into practice skills such as academic writing, analytical and critical thinking skills as well as referencing.

This assessment is worth 10% of your marks in Phase 3.
The Task
In an essay of no more than 1500 words, discuss using relevant theory the lessons that British Airways might have taken away from the failure in 2007 of Silverjet.
Learning Objectives
This task will help you to:
Structure an academic argument
Understand different approaches to supply and demand
Collect, evaluate and use information from published sources to support an argument
Develop your written voice as an academic
Use appropriate referencing
Resources
Rather than the usual MUST, SHOULD, COULD criteria, at the end of this document is what is referred to as a rubric, which is used for marking. You should use this to guide you, especially in the last week before submission to check that you have met the criteria for the grade that you want to achieve.

In addition, you will find the following of use:
The chapter on “Individual Decision-Making” in Volume One and the chapters on “Pricing Strategies; Understanding and Capturing Customer Value” and “Demand and the Consumer” which you will find in Volume Two of the textbook
Information in the Study Hub on essay writing and referencing
Supporting information in the Weekly Learning Block including the case study “Silverjet: a fallen star”.
Notes
We will be checking similarity on this assessment. Essays with high similarity will be reported as an Academic Concern.
Submission
You need to submit your work via your Learning Community BREO site by 10am on Friday 6th January 2017, which is at the end of the first week back after the Christmas Break. However, please don’t leave this until the first week to complete; you will be very busy!

Feedback
Feedback will be available via Turnitin by Friday 27th January 2017.
Mitigating Circumstances
If you are going to have difficulty submitting this assessment on time due to exceptional circumstances you should contact the Student Engagement Team as soon as possible. You can phone them on 01582 489622 or visit the team in F Block. Alternatively you can complete an online application for mitigating circumstances at:
http://www.beds.ac.uk/studentlife/student-support/academic/extenuating

Assessment Criteria Third Class degree 40%-49% Lower Second 50%-59% Upper Second 60%-69% First Class degree 70% plus
In your essay, references to published literature, their credibility and relevance to the topic. Limited use of references to support the essay. Few resources used. Inconsistent use of referencing using a limited range of resources. Presence of referencing but not necessarily complete Consistent use of referencing throughout the essay from a range of sources. Wide range of high quality references. Referenced accurately using Harvard referencing system both within the text and listed at the end of the essay. All arguments and assertions supported by suitable references.
Understanding of the issues that caused the collapse of Silverjet. Limited understanding of the case study.
Strong reliance only on the case study, lacks theory. General understanding of the issues. Limited evidence of research beyond supplied materials and minimal discussion of relevant theory. Appropriate levels of research and theory. Discussion is well constructed, but some room for improvement.
Discussions are clear, relevant and use theory, demonstrating strong understanding of the Silverjet experience and clear understanding of the relative value of each source used.

Application of the Silverjet lessons to British Airways. Limited discussion of application to British Airways Some discussion of how lessons from Silverjet may have impacted on British Airways Good links between Silverjet and current practice at British Airways. Excellent discussion of Silverjet in relation to current practice at British Airways.

Structure and clarity of presentation of your essay
Poor quality of presentation with errors in text. Clarity of expression also weak with inappropriate academic style. Navigation problematic for the reader. Acceptable presentation with numerous errors. Poorly organised. Clear presentation with limited errors, and with appropriate communication and style. Relatively well-organised. Clear and logical in all areas of presentation. Communication and style appropriate and mature. Easy to navigate around.

 

 

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3-1 Cost-volume-profit (CVP) analysis examines the behavior of total revenues, total costs, and operating income as changes occur in the units sold, selling price, variable cost per unit, or fixed costs of a product.

3-2 The assumptions underlying the CVP analysis outlined in Chapter 3 are

1. Changes in the level of revenues and costs arise only because of changes in the number of product (or service) units sold.

2. Total costs can be separated into a fixed component that does not vary with the units sold and a variable component that changes with respect to the units sold.

3. When represented graphically, the behaviors of total revenues and total costs are linear (represented as a straight line) in relation to units sold within a relevant range and time period.

4. The selling price, variable cost per unit, and fixed costs are known and constant.

 

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