finance assignment

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C. This is about the current quoted futures price for a futures contract for delivery in 14 months of a bond paying, semi-annually, coupon at a rate of C1 percent per year on $100 face value, with a maturity of C2 years and 3 months from now.The last coupon payment was 3 months ago.Assume that the term structure is flat with a rate of interest of C3 percent per year.Assume semi-annual compounding for valuation of bond and for determination of conversion factor.Assume continuous compounding for valuation of futures price. Write the answers to the following:

  1. Conversion factor.
  2. Cash spot price of bond.
  3. Cash futures price.
  4. Quoted futures price.

H. Use Black’s approximation to find the current fair values of a 13-month American call option with a strike price of H1 on a dividend paying stock trading at a current market price of H2, interest rate of H3 percent per year, continuously compounded and volatility of H4 (as a number, not percent).The stock will go ex-dividend every 3 months starting from time zero and the amount of each quarterly dividend is 4 percent of the current stock price.Obtain the following fair values of options needed to find Black’s approximate American call value:

  • European call option with maturity at first ex-dividend date.
  1. European call option with maturity at second ex-dividend date.
  2. European call option with maturity at third ex-dividend date.
  3. European call option with maturity at fourth ex-dividend date.
  4. European call option with maturity 13 months.
  5. Current fair value of American call using Black’s approximation

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