i$)$

Diageo's share price is $134.$ If the next annual results report profits,

analysts forecast a price of $151$ in one year. If they report losses,

analyst expect a price of $87$ in one year. If the strike price is $130$ and

the risk$-$free rate is $4\%($assume a bond with a face value of $100),$ find

the price of a put and the price of a call on the stock using exclusively

the replicating portfolio method. iii$)$

Goldman Sachs made an agreement with HSBC to swap a fixed $3\%$ annual rate for the floating $12-$month EURIBOR each year for $5$ years. When the swap was initiated, EURIBOR was $2\%.$ After one year, the rates for $4-$year swaps are $4\mathrm{.}5\%.$

$($a$)$ Is the swap profitable for Goldman Sachs?

$($b$)$ Today $(1$ year after the swap was initiated$)$ HSBC asks Goldman Sachs to terminate the swap. What is the cost?

You see the following information in an email about Nordea's upcoming rights issue. All amounts in GBP$.$

No of shares

$340,000$

Current price

$14$

Right $($new for

old$)$

$1$ for $5$

Price of new

share

What is the ex$-$rights price and the value of the right?

Do current shareholders benefit, and at what price do they become indifferent to having a right?

How would shareholders be affected if a cash offering at the same price was used instead?

$($a$)$ Find the ex$-$rights price of the stock and the value of the right. $($b$)$

Is there an increase in portfolio value for the current shareholders?

Also, what price change are they willing to accept before they become indifferent to having a right? $($c$)$ Show that, for the same number of rights and target amount to be raised, a higher or lower price for the new shares does not make a difference for the shareholders. $($d$)$ What is the effect on shareholder portfolio value if the same amount was to be raised via a cash offer at the same price $(3$ GBP$)?$ Show numerically.