Homework Answers
7 & 9. D 0.6930
(I did not find any difference between the two question, is there
any- they are exactly the same word to word)
8. Capital Asset pricing model:
As per CAPM model:
Re= Rf+(Rm-Rf)B
Re= required rate of return.
Rf= Risk-free rate.
Rm =Market Risk Premium/ market return.
B = Beta, systematic risk.
How each of them is determined/estimated?
Risk-free rate (Rf) is the rate of return an investor expects to earn from an investment which carries zero risk.
Rm return on market: it is determined by the overall return on the market. For example: S&P500 Index in the USA, Nifty in India.
Beta that is systematic risk is determined by: Rate of change of stock return to the rate of change of market return. It is the sensitivity of stock return to Market return.
Answer: Option C. Relates Interest on...Index.
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6 7. nodw ob 15be bluod dW 0 An exchange rate is 0.7000 and the six-month...
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Six-month LIBOR is 3.5%. LIBOR forward rates for the 6- to 12-month period and for the...
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4. (4 points) The currency exchange rate for GBP is $1.25 per pound. The risk free...
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A spot exchange rate between Korean Won (KRW) and the United States Dollars (USD) is 0.420...
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i need simple explain please 7) The zero rates for three, six, nine and twelve compounding....
i need simple explain
please
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Six-month LIBOR is 3.5%. LIBOR forward rates for the 6- to 12-month period and for the 12- to 18-month period are both 3.7%. Swap rates for 2- and 3-year semiannual pay swaps are 3.6% and 3.8%, respectively. Estimate the LIBOR forward rates for maturities of 18-month to 2 years, 2 to 2.5 years, and 2.5 to 3 years. Assume that the 2.5-year swap rate is the average of the 2- and 3-year swap rates and that OIS zero rates for...
4. (4 points) The currency exchange rate for GBP is $1.25 per pound. The risk free interest rates for USD and GBP are 1% and 1.5% per year, respectively, with continuous compounding. The volatility of GBP exchange rate is o= 15%. Compute the price of a 6-month at-the-money European put option in a 3-step CRR binomial model. Compare the binomial price with the Black-Scholes price.
i need simple explain
please
7) The zero rates for three, six, nine and twelve compounding. These rates suggest that the forwa continuous compounding. What is the present va annum rate with quarterly compounding) for $1,000,000? e, Six, nine and twelve months are 8%, 8.2%, 8.4% and 8.5% with continuous Best that the forward rate between nine months and twelve months is 8.8% with Is the present value of an FRA that enables the holder to earn 9.4% (per very...
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