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# Problem No.1_Options_on Chapter 8_Ch15_Prob4 and 6_Swaps problem_Chapter 23_Answer

Problem No.1_Options_on Chapter 8_Ch15_Prob4 and 6_Swaps problem_Chapter 23_Answer

Problem No.1_Options_on Chapter 8_Ch15_Prob4 and 6_Swaps problem_Chapter 23_Answer

Problem No.1_Options_on Chapter 8_Ch15_Prob4 and 6_Swaps problem_Chapter 23_Answer

Problem No.1_Options_on Chapter 8_Ch15_Prob4 and 6_Swaps problem_Chapter 23_Answer

“Problem No. 1 on Options based on Chapter 8
A Call Option on the stock of XYZ Company has a market price of \$9.00. The price of the underlying stock is \$36.00, and the strike price of the option is \$30.00 per share. What is the Exercise Value of this Call Option? What is the Time Value of the Option?”
“Problem on Capital Structure Change – Chapter 15 – No. 4
“One type of leverage affects both EBIT and EPS. The other type affects only EPS.” Explain this statement.”

“Problem on Capital Structure Change – Chapter 15 – No. 6
Why do public utility companies usually have capital structures that are different from those of retail firms?”

“Problem on Swaps based on Chapter 23
Company A can issue floating-rate debt at LIBOR + 1%, and it can issue fixed rate debt at 9%. Company B can issue floating-rate debt at LIBOR + 1.5%, and it can issue fixed-rate debt at 9.4%.
Suppose A issues floating-rate debt and B issues fixed-rate debt, after which they engage in the following swap: A will make a fixed 7.95% payment to B, and B will make a floating-rate payment equal to LIBOR to A.
What are the resulting net payments of A and B?

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