Question: Need a typed answer by keyboard . Solve fast please . I will give you a helpful rating if you solve fast and solve good
Need a typed answer by keyboard .
Solve fast please .
I will give you a helpful rating if you solve fast and solve good .
An investor is willing to pay $300,000 for an equity linked note that at the end of two years pays the larger of two amounts: 1. an amount providing one-fourth (i.e., 25%) of the return from today on a stock index plus $300,000 in cash, or 2. $300,000 in cash. The volatility of the stock index is 25.00% per year, the index does not have any dividend payments and the two year interest rate based on U.S. Treasuries is 3.00% per year (compounded continuously). What is the cost of the bond portion and option portion to create this ELN note?
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
