IMPORTANT NOTE: The questions must be address in its full context. These questions are an opportunity to go outside the box to demonstrate your analytical, integrative, problem- solving and critical thinking skills using the knowledge acquired in your readings. As a result, it is very important to pay close attention to the questions and be able to conduct your discussions in the context of your question. – Please keep this in mind when you complete this assignment.
You must expand your ideas further. Analysis must be deep and very instructive.
ANSWER THE FOLLOWING QUESTION. This questions should be answered in at least 300 words. Quality of content and use of course and outside-of-course resources to support your position or analysis. The answers should not be in the form of essay, just straight to the point- Work must be original and cite your sources.
Please be sure to answer the question completely but specifically in well-written complete sentences.
- What impact does the plowback ratio have on the P/E ratio?
- Define each of the following terms and give examples for each:
- Call Option
- Put Option
- In the money
3. What is the Black-Scholes formula? Provide a definition for each element of the formula.
4. In what circumstances would you choose to use a dividend discount model rather than a free cash flow model
to value a firm?
5. Why do you think the most actively traded options tend to be the ones that are near the money?
6. Discuss the put-call parity relationship.