1)If the risk-free rate is 5 per cent, the expected return on the market is 8 per cent, and the expected return on

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1)If the risk-free rate is 5 per cent, the expected return on the market is 8 per cent, and the expected return on Security Jis 13 per cent, what is the beta of Security )? 2)A contractor is considering investing in purchasing a crane for 24 months construction job. The purchase price is $150,000. He will sell the crane for $100,000 after finishing the construction job (i.e., after 24 months). - Savings are expected to be $1,700 per month The crane is in fairly good condition now, so he doesn't expect to have any maintenance costs for the first nine months. Starting from the 10th month, maintenance costs are expected to be $1500 per month. - Monthly interest is 1%. A. Draw Cash flow Diagram B. what is the net present worth of this investment? C. Should the contractor buy the crane? 3)Given the following information, what is the value of the corresponding call options? Stock price (P) is $35.60, exercise price (EX) is $40, time to expiry is nine months, risk-free rate (RF) is 3.25%,

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1)Please use this google drive link to download the answer file. https://drive.google.com/file/d/1M7Fy1660p25wwAud7uatEhVjn9DQFep_/view?usp=sharing Note: If you have any trouble in viewing/downloading the answer from the given link, please use this below guide to understand the whole process. https://helpinhomework.org/blog/how-to-obtain-answer-through-google-drive-link 2)please see the attached file. Part A: Cash flow diagram as follows: Upward arrow indicate cash inflows and downward arrows, cash outflows. 3) We use Black-Scholes Model to calculate the value of the call option. The value of a call option is: C = (S0 * N(d1)) - (Ke-rT * N(d2)) where : S0 = current spot price K = strike price N(x) is the cumulative normal distribution function r = risk-free interest rate T is the time to expiry in years d1 = (ln(S0 / K) + (r + σ2/2)*T) / σ√T d2 = d1 - σ√T σ = standard deviation of underlying stock returns First, we calculate d1 and d2 as below : ln(S0 / K) = ln(35.60 / 40). We input the same formula into Excel, i.e. =LN(35.60/40) (r + σ2/2)*T = (0.0325 + (0.152/2)*(9/12) σ√T = 0.15 * √(9/12) d1 = -0.6445 d2 = -0.7744 N(d1) and N(d2) are calculated in Excel using the NORMSDIST function and inputting the value of d1 and d2 into the function. N(d1) = 0.2596 N(d2) = 0.2193 Now, we calculate the values of the call option as below: C = (S0 * N(d1)) - (Ke-rT * N(d2)), which is (35.60 * 0.2596) - (40 * e(-0.0325 * (9/12)))*(0.2193) ==> $0.6801 Value of call option is $0.6801

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1)If the risk-free rate is 5 per cent, the expected return on the market is 8 per cent, and the expected return on Security Jis 13 per cent, what is the beta of Security )? 2)A contractor is considering investing in purchasing a crane for 24 months construction job

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