1. Draw payoff diagram for a long put position on a stock of XYZ that you purchased for $20, has a strike price of $200 and matures in 6 months from now. (The chart needs to be prepared in Excel and has to be professional looking with axes properly labeled, a title, proper units, important points labeled.) [20]
2. Find the appropriate call options prices from finance.yahoo.com for AAPL to demonstrate the relationship between time to maturity and the value of options. You should use both an appropriate chart and words to explain the relationship. [15]
3. Find the NPV and IRR or a project which requires and investment of $100,000 today and will return $30,000 two years from now, $4,000 three years from now, and $55,000 in four years, and $44,000 in five years. (Be careful, the first positive cash flow is coming in year two. You are to find NPV today. I recommend that you do the math multiple ways to make sure that your number is right.) [15]
4. Provide an example of agency problem (different from those that I provided in the lecture.) [5]
5. What is fronting? [5]
6. Why is it advisable to do nothing in most cases when faced with currency exposure? (Provide at least 3 good reasons)[10]
7. What is the best way to deal with operating exposure?