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What does a negative PVGO mean?

What does it mean to use comparables to value a company?

Time limit: 90 minutes INSTRUCTIONS Hold your camera up and point it away from you at eye level. I must be able to see what is directly in front of you: monitor, keyboard, mouse, calculator, and workspace. YOU MAY NOT USE EXCEL during the exam. Use your calculator and type your work into Canvas. You should not be looking anywhere but at Canvas and at your calculator. YOU MAY NOT USE scratch paper during the exam. I should not see you writing anything. Type your work into Canvas. Show as much work in Canvas as possible so that I can award partial credit for incorrect answers. Use a financial calculator to perform calculations. No graphical calculators. Hold your calculator up to the camera. Clear your desktop/workspace of everything but your keyboard, mouse, and calculator. No tabs open other than Canvas. No books. No notes. No phone. No scratch paper. No outside help. Have your webcam on and pointed at your face at all times during the exam. If the exam session terminates before the time limit, contact me by email IMMEDIATELY. If you don’t contact me in a reasonable amount of time, I will grade what was in Canvas when the exam terminated. Thank you! Exam Total (100 points) 10 short answer questions (40 points) 12 problems (60 points) Click “True” to indicate that you have read and understand the instructions, and that you pledge on your honor to be honest and follow the instructions.

A stock has an expected ROE of 11.47% per year, expected earnings per share of $1.32, and expected dividends of $0.71 per share.  The market cap rate is 14.15% per year.  What is its forward P/E ratio?

What value does a put option’s delta approach as it moves deeper in-the-money?

You are holding a 60.90 call option with a delta of 0.72. The option will expire in 187 days and the underlying stock is currently trading at 64.00. The risk-free rate is 5.30% and N(d2) = 0.69.  What is the value of the call?

You own 100 shares of HAT stock. You bought one put on HAT with a strike of $65.80 when puts were trading at $9.47 and the stock was trading at $65.80. Now, HAT is trading at $71.00. The option will expire today. Identify this strategy. Why would an investor do this? What is the net profit/loss of this strategy? At what stock price does the strategy breakeven?

You own 100 shares of LUV stock. You wrote one call on LUV with a strike of $70.90 when calls were trading at $9.50 and the stock was trading at $70.90. Now, LUV is trading at $63.00. The option will expire today. Identify this strategy. Why would an investor do this? What is the net profit/loss of this strategy? At what stock price does the strategy breakeven?

The Black Scholes model that we learned about in this class can be used to value which type of option?

Use the binomial option pricing model to find the put premium for the stock in Question #19.